Wash Sale Rules


H

hr(bob) hofmann

Can someone please give me the wash sales rules in less than 500
words.

Thanks,
 
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A

Arthur Kamlet

Can someone please give me the wash sales rules in less than 500
words.
See http://invest-faq.com/articles/tax-wash-sale.html


If you sell a security at a loss and within +/- 30 days you buy
substantially equivalent securities, the loss is disallowed.

The disallowed loss is added to the cost basis of the securities
you bought to crate the wash sale. (Sometimes referred to as
"replacement shares.")


The date of the replacement sahres changes the acquisition date
of the washed shares.


That covers between 95-99% of the situations.


Many many more words are needed to cover the other 1-5%

For example, this rule applies to related parties (Including
buying replacemen shares in your IRA.)

The rule applies to loss on closing a short sale position when
in the +/- 30 days period you sell short again.


An option and its underlying secuirty are substantially identical
but there is no such strong statement that options differing by
type, strike or expiration date are substantially identical to each
other. I personally consider such options not to be sub. identical.


Thee's other rules for other special cases.



The general rule (Code section 1091) was added to prevent someone with
a paper loss to claim the loss through selling, but buy it back and
claim the tax loss. It makes more sense to understand this when
the sale is Dec 31 and the buy back is Dec 30 or Jan 2. By waiting
more than 30 days you are deemed to be sufficienty at risk that you
may then claim the loss and avoid the wash sale consequences.


Pub 550 does a good job of giving the official opinions about
wash sales.
 
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H

hr(bob) hofmann

Seehttp://invest-faq.com/articles/tax-wash-sale.html

If you sell a security at a loss and within +/- 30 days you buy
substantially equivalent securities, the loss is disallowed.

The disallowed loss is added to the cost basis of the securities
you bought to crate the wash sale.  (Sometimes referred to as
"replacement shares.")

The date of the replacement sahres changes the acquisition date
of the washed shares.

That covers between 95-99% of the situations.

Many many more words are needed to cover the other 1-5%

For example, this rule applies to related parties (Including
buying replacemen shares in your IRA.)

The rule applies to loss on closing a short sale position when
in the +/- 30 days period you sell short again.

An option and its underlying secuirty are substantially identical
but there is no such strong statement that options differing by
type, strike or expiration date are substantially identical to each
other. I personally consider such options not to be sub. identical.

Thee's other rules for other special cases.

The general rule (Code section 1091) was added to prevent someone with
a paper loss to claim the loss through selling, but buy it back and
claim the tax loss.  It makes more sense to understand this when
the sale is Dec 31 and the buy back is Dec 30 or Jan 2.  By waiting
more than 30 days you are deemed to be sufficienty at risk that you
may then claim the loss and avoid the wash sale consequences.

Pub 550 does a good job of giving the official opinions about
wash sales.
Art:

Thanks, the 30-day number was what I needed, everything else I plan to
do is straight-forward.
 

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