Therefore, you can’t claim a $7,000 loss. Because the shares were “bought back” within 30 days of the sale, the wash sale rule applies. On November 15, you buy 500 shares of XYZ again for $3,200. for $10,000 and sell them on November 1 for $3,000.
So, the disallowed amount can be claimed when the new stock is finally sold at some point in the future (other than in a wash sale).Īssume you buy 500 shares of XYZ Inc. Note that the rule applies not only to buying back stock within 30 days after selling it but also to a 30-day period before the sale date to prevent “buying the stock back” before it’s even sold.Īlthough the loss can’t be claimed on a wash sale, the disallowed amount is added to the cost of the new stock to increase its tax basis. The wash sale rule is designed to prevent taxpayers from benefiting from a loss without actually parting with ownership. Under the wash rule, selling securities for a loss and buying back substantially identical securities within 30 days before or after the sale date means the loss can’t be claimed for tax purposes.
It comes into play when an investor wants to realize a loss on a security for tax purposes while continuing to invest in the security. If you’re planning to sell stock or other securities at a loss to offset gains you realized earlier in the year, beware of the “wash sale” rule. Beware of “Wash Sales” When Selling Securities
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