Here is a typical and terrible explanation of the wash sale rule from Andrew Leckey
:
A. If you want to get out of poor-performing stocks or mutual funds, it's important to be able to take a capital loss for the sale on your income tax return. The wash sale rule could trip you up.
A wash sale is when you sell a security at a loss, and--within 30 calendar days before or after that sale--you buy a substantially identical security. Substantially identical includes any stock issues of the same company.
Wash sales taking place within 30 days of the underlying purchase do not qualify as tax losses under IRS rules.
"If you buy the stock back sooner than 30 days, you're in the same position as if you'd never sold it," said John Dyer, CPA and partner in Peter Shannon & Co., Hinsdale. "You can't take the loss."
To avoid wash sales, wait 31 days before buying more stock. Or, be sure any securities bought after selling it are not substantially identical. You could buy a stock in a different firm in the same industry or a mutual fund with similar goals from a different investment company.
chicagotribune.com
Note especially:
<<But there's still one way to claim a loss if you buy back a security before the 30-day holding period is up: You can add the loss to the basis of the repurchased security. Let's say you buy a share at $10, sell it at $8, and buy it back within 30 days at $9. You can add the original $2 loss to your new cost basis, which is now $11. If the stock rises and then you sell, let's say at $12, your taxable gain is only $1. >>
I apologize for any repetition here, but I keep running into traders who have not fully digested all the intricacies of the wash sale rule.
Message 14488034 |
