Wash-Sale Rule

Wash-Sale Rule

An IRS regulation stating that one may not claim a capital loss for tax purposes if one repurchases the same position within 30 days. Suppose one sells a stock at a substantial loss but immediately buys back the same stock at the same price. Effectively, the locked in loss is "unlocked" and one can still make a profit on the investment in the long term. The 30 day wash-sale rule exists to prevent investors from taking tax deductions on losses they do not actually incur. Some investors find a way around this by exercising a tax swap. The 30 day wash-sale rule should not be confused with wash trading, which is a different concept altogether.
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Treasury also proposed relief from the Internal Revenue Service's wash-sale rule, which in a variable NAV setting might have posed a problem for investors who buy and sell money funds frequently.
Of course, to avoid the wash-sale rule, I would have bought different securities if any of those sold was at a loss.
While a comprehensive discussion of the straddle rules is not within the scope of this item, the straddle rules include (1) the wash-sale rule under Temp.
An ETF is one example of a complex investment vehicle that has "presented investors with new twists on an old plot, [specifically,] how to take advantage of loopholes in the wash-sale rule without running afoul of it.
According to the wash-sale rule, if you sell a stock or security at a loss you will not be permitted to take that loss on your taxes if you buy the same vehicle 30 days before or after the sale.
1091 wash-sale rule only applies to losses--not to gains.
Where the sale and reacquisition of the stock or securities has occurred entirely within an IRA or Roth IRA, the wash-sale rules do not apply.
If you wish to reinvest in the securities that you sell for a loss, beware of the wash-sale rules.
This is consistent with wash-sale rules affecting tax-motivated trading.
The wash-sale rules of section 1091 generally prevent deducting losses from the sale of securities if, within a 61-day window around the sale (from 30 days before to 30 days after), the taxpayer has purchased similar securities.
The wash-sale rules apply to stock, securities, options, and short sales, but they do not apply to transactions involving foreign currency and commodities futures contracts (Rev.