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© SEI 2022 For Intermediary Use Only. Do Not Distribute. 5 3. Questions regarding wash sale reporting: A. What is a wash sale? The IRS Wash Sale Rule was amended on October 12, 2010 to clarify that wash sales are sales of securities in which losses are realized by the taxpayer, but not recognized, because the taxpayer acquires a 'substantially identical' security on the sale date, or within 30 calendar days before or 30 calendar days after the sale date. Since the economic position of the taxpayer has not changed on the combined sale and acquisition, the loss deduction is disallowed. 'Substantially identical' securities can include buying the same exact security, buying a call option for the security, or writing an option for the security. When a buy occurs, the system looks back and forward 30 days to see if the wash sale rule was violated. If it was, the system adjusts the realized loss of any sales to disallow the loss, and adjusts the cost basis and the acquisition date of the new purchase to reflect the original cost and purchase date. A wash sale may be a partial or full wash; a partial wash is when only some of the sold tax lots violate the wash sale rule. B. What will post to my client's account? Because a wash sale negates the capital loss, federal cost adjustments are made to the sale transaction to fully negate or partially negate the capital loss. These cost adjustments post to an account as an 'adjustment transactions' and the transaction will reference that a wash sale adjustment was made. Depending on the number of lots sold and whether those lots were long-term losses or short-term losses, the number of federal tax adjustments will differ. Additionally, federal cost adjustments are made to the purchased lots to offset the negated capital loss, thus increasing the cost basis of the purchase. All of these transactions will appear in the clients' transactions for each wash sale. C. What will show on my client's 1099-B? If an account gets 1099-B reporting and has a wash sale adjustment, the 1099-B will show the total amount of losses that were disallowed. This is reported in box 1g on the 1099-B. D. Will wash sales be negated across multiple client accounts? No. Securities across multiple portfolios for a single account will be disallowed. However, SPTC is not performing the wash sale adjustment across different accounts owned by the same taxpayer. The taxpayer must still adjust for wash sales across different accounts when they calculate their taxable gain/loss. This is also true if the client holds accounts outside of SPTC. E. How do Dividend Reinvestments cause wash sales? If a mutual funds pay dividends and the investor reinvests the dividends, the reinvestment is considered a buy. This buy can trigger a wash sale if the purchased security was sold at a loss within 30 days. A wash sale transaction caused from a dividend will post to the tax forms and account transactions in the same manner as all other wash sale transactions. 4. Questions regarding the Return of Capital Reclassification (ROCR) Program: A. What is the annual Return of Capital Reclassification (ROCR) program? Consistent with previous years, SPTC will run the annual Return of Capital Reclassification (ROCR) program in February of 2023. This program is designed to adjust cost basis for assets that reclassified dividend payments at any point during the tax year. These cost adjustments will report on both the 1099-B and DIV forms and, within the account, cost basis adjustments will occur to any account holding assets that reclassified dividends for the tax year. B. What is Reclassification? During the year, certain 'collective' instruments, including Mutual Funds, REITs and Unit Investment Trusts, pay periodic dividend income to holders throughout the year. These dividend payments are based on estimated income for the year. After the year ends, the issuer determines if any dividend paid was not eligible as income earned. If it is determined that a portion of a dividend payment should not have been

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