David received a Form 1099-B from his broker showing a "wash sale loss disallowed" amount from selling XYZ stock and rebuying it within a week. He noticed the cost basis reported for his new XYZ shares on the form was higher than his actual purchase price.

Why would David's broker report a higher cost basis for the new shares after a wash sale, and how does this affect David's taxes when he eventually sells the new shares?

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