tax swap(redirected from Tax Swaps)
A situation in which an investor sells a long position to claim a capital loss for tax purposes and immediately buys an equivalent position in a similar (but not the same) company or industry. A tax swap allows the investor to reduce his/her tax liability while not running afoul of the wash sale rule, which states that one cannot claim a capital loss for tax purposes if one repurchases the same position within 30 days. See also: Wash sale.
The sale of a security that has declined in price since the purchase date and the simultaneous purchase of a similar, but not substantially identical, security. The purpose of the swap is to achieve a loss for tax purposes while continuing to maintain market position. See also wash sale.