Wash sale


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Wash sale

Purchase and sale of a security either simultaneously or within a short period of time, often in order to recognize a tax loss without altering one's position. See: Tax selling.

Wash Sale

1. An illegal act in which an investor buys and sells the same security at the exact same time, especially through two different brokerages. This results in neither profit nor loss for the investor, but creates the impression that the security is undergoing heavy trading, which could drive up the price or generate unwarranted interest.

2. An illegal act in which an investor takes essentially the same position as one he/she closed at a loss less than 30 days earlier. Wash sales are intended to provide the investor with a write-off (through the loss) without fundamentally changing the position he/she holds.

wash sale

The illegal purchase or repurchase of an asset within 30 days of the sale date of a basically identical asset that was sold in order to take a tax loss. For example, if an investor sold a security at a loss and then immediately repurchased the same security or a basically identical security, the Internal Revenue Service would consider the transaction a wash sale.

Wash sale.

When you purchase and then sell or sell and then repurchase the same security or a substantially similar security within 30 days, the double transaction is called a wash sale.

As an individual investor, you can't use any capital losses that the sale produces to offset capital gains from selling other securities in your portfolio.

For example, if you sold 200 shares of an underperforming stock on December 15 intending to use the loss on that sale to offset gains on other sales, your offset would be invalid if you repurchased the stock before the following January 15. But if you repurchased on January 16, the offset would be valid. In fact, avoiding wash sales is an important part of tax planning.

In a broader use of the term, purchasing and then quickly reselling a security may be described as a wash sale, whether the transaction is part of an innocent trading strategy or a pump-and-dump scheme.

Wash Sale

The purchase of substantially similar stock or other securities within 30 days before or after the sale of the similar stock or security at a loss. A taxpayer cannot claim a wash sale loss; instead, the loss is added to the basis of the most recently purchased substantially similar securities.
References in periodicals archive ?
For each previously sold security, the tool will break down realized gains and losses both separately and adjusted for the prospective wash sale, the number of sales subject to the wash sale, and the prospective wash expiration date.
Avoiding the wash sale rule, The wash sale rule disallows a capital loss on the sale of shares to the extent the investor buys--or enters into a contract or option to acquire--substantially identical stock or securities within 30 days before or after the day the investor makes the sale or transfer that produces the loss.
The wash sale rules apply to all classes of taxpayers, including corporations.
Calculating wash sales can be a time-consuming process and particularly complicated for fund administrators, who must calculate and verify loss deferrals and basis adjustments in order to generate accurate fund distributions.
They can also turn to software that automatically adjusts for wash sales and corporate actions, and helps identify the most efficient tax lots to sell.
Short sales are subject to special tax rules that affect holding period and short-term/long-term gain/loss determinations and special wash sale rules.
TradeLog is a simple to use program that fills this critical year end tax accounting need, while also providing the ability to import a proper accounting of capital gains and wash sale adjustments into most popular tax software programs.
TradeLog(TM) boasts the most sophisticated trade matching, capital gains, and wash sale computations of any software on the market.
The real advantage of using mark-to-market accounting is that traders can claim losses as ordinary losses, and can be freed from concerns about the wash sale rule, constructive sale rule and straddles.
Additionally, any loss on the sale of an ownership interest would be subject to the wash sale rules.
A wash sale occurs when any security is purchased within 30 days of a loss incurred from the sale of any substantially identical security.