Let's say a Day Trader buys and sells a stock on the same day and makes a loss of $1,000. Then she buys and sells the same stock the next day and makes a profit of $500. On the third day she files her taxes.
As I understand the Wash Sales rule, she cannot claim a $500 overall loss on the stock. She will need to declare a $500 profit on the stock. Because she bought a "substantially similar" (identical, actually) stock within 30 days of the loss transaction.
Am I interpreting this correctly? (I hope I'm wrong!)