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Here is a thorough explanation from The Motley Fool that also provides examples of the various scenarios involving wash sales and when disallowed deductions must to be carried forward:

Under the wash-sale rules, if you sell stock for a loss and buy it back within 30 days before or after the loss-sale date, the loss cannot be immediately claimed for tax purposes.

This rule is designed to prevent you from selling stock to claim the loss and then buying it back within a short period of time to retain ownership. The rule applies to a 30-day period before or after the sale date to prevent "buying the stock back" before it's even sold.

You get to claim the loss -- just not now. Although the loss can't be claimed on a wash sale, the disallowed amount is added to the cost of the repurchased stock. So the loss can be claimed when the stock is finally disposed of, other than in a wash sale.

Example: Larry Laundry buys 500 shares of XYZ Corp. for $10,000 and sells them on June 5 for $3,000. On June 30, he buys 500 shares of XYZ for $3,200. Since the stock was repurchased within 30 days of loss-sale date, the wash-sale rules apply. Larry can't claim his $7,000 loss. Instead, he must adjust his basis in the repurchased shares. His basis in his new 500 shares is $10,200 -- the actual cost plus the $7,000 disallowed loss.

Larry would also be in violation of the wash-sale rules if he purchased his new shares on June 1 and then made the loss sale on June 5. Remember, the rule is 30 days before or after the date of the loss sale. But also remember that if Larry had waited for the required 30 days before he purchased another 500 shares, there would be no wash sale.

Buying fewer shares What if you repurchase fewer shares than you originally sold for a loss? Is all of the loss disallowed? Nope. Only the portion of the loss attributable to the "washed" shares will be disallowed.

Thus, in the above example, if Larry had bought back only 300 of the 500 shares (60%), he would be able to claim 40% of the loss on the sale ($2,800). The remaining $4,200 of the loss disallowed under the wash-sale rules would be added to Larry's cost of the 300 shares, and Larry's basis in the new shares would be $6,120 -- the cost of the original 300 shares of $1,920 plus the disallowed loss of $4,200.

Larry certainly has a wash sale in the example above. But let's say that Larry tires of his position in XYZ and sells his 500 shares on Dec. 20 of the same year for $4,000. Larry's adjusted basis in the shares is $10,200 based on his wash-sale computations, and his overall loss would amount to $6,200.

But if you break down the two separate buy and sell transactions, you see that Larry generated a loss of $7,000 on the first transaction and a gain of $800 on the second transaction -- for a net loss of $6,200. This, amazingly, is the same amount of loss Larry computes when taking the wash-sale and basis-adjustment rules into account. So, since Larry closed out his entire position in the shares before the end of the year and stayed out of the stock for the required 30-day period, the wash-sale transactions actually become meaningless, and Larry can compute his gains and losses as he regularly would.

The fact is that if you incur a wash sale, the loss is disallowed and must be added to the cost basis of the second position and carried forward. More on this scenario with various examples can be found at The Motley Fool web site:

https://www.fool.com/taxes/wash-sales-and-worthless-stock.aspx

Under the wash-sale rules, if you sell stock for a loss and buy it back within 30 days before or after the loss-sale date, the loss cannot be immediately claimed for tax purposes.

This rule is designed to prevent you from selling stock to claim the loss and then buying it back within a short period of time to retain ownership. The rule applies to a 30-day period before or after the sale date to prevent "buying the stock back" before it's even sold.

This might sound outrageously unfair to you. After all, if your money was plunked into the stock and your dollars were lost, how can it be that you're not allowed to claim the loss?

Well, you do get to claim the loss -- just not now. Although the loss can't be claimed on a wash sale, the disallowed amount is added to the cost of the repurchased stock. So the loss can be claimed when the stock is finally disposed of, other than in a wash sale.

Example: Larry Laundry buys 500 shares of XYZ Corp. for $10,000 and sells them on June 5 for $3,000. On June 30, he buys 500 shares of XYZ for $3,200. Since the stock was repurchased within 30 days of loss-sale date, the wash-sale rules apply. Larry can't claim his $7,000 loss. Instead, he must adjust his basis in the repurchased shares. His basis in his new 500 shares is $10,200 -- the actual cost plus the $7,000 disallowed loss.

Larry would also be in violation of the wash-sale rules if he purchased his new shares on June 1 and then made the loss sale on June 5. Remember, the rule is 30 days before or after the date of the loss sale. But also remember that if Larry had waited for the required 30 days before he purchased another 500 shares, there would be no wash sale.

Buying fewer shares What if you repurchase fewer shares than you originally sold for a loss? Is all of the loss disallowed? Nope. Only the portion of the loss attributable to the "washed" shares will be disallowed.

Thus, in the above example, if Larry had bought back only 300 of the 500 shares (60%), he would be able to claim 40% of the loss on the sale ($2,800). The remaining $4,200 of the loss disallowed under the wash-sale rules would be added to Larry's cost of the 300 shares, and Larry's basis in the new shares would be $6,120 -- the cost of the original 300 shares of $1,920 plus the disallowed loss of $4,200.

Clearly, if you're doing a bunch of trading in a specific stock (that's not very Foolish, by the way), the wash-sale rules can really complicate things.

Burning bridges But -- and this is a very big "but" -- the wash-sale rules don't apply if you close out your entire position in the stock before the end of the year and then stay out of the stock for the required 30-day period before or after the date of the loss sale.

Let's look at Larry again. He certainly has a wash sale in the example above. But let's say that Larry tires of his position in XYZ and sells his 500 shares on Dec. 20 of the same year for $4,000. Larry's adjusted basis in the shares is $10,200 based on his wash-sale computations, and his overall loss would amount to $6,200.

But if you break down the two separate buy and sell transactions, you see that Larry generated a loss of $7,000 on the first transaction and a gain of $800 on the second transaction -- for a net loss of $6,200. This, amazingly, is the same amount of loss Larry computes when taking the wash-sale and basis-adjustment rules into account. So, since Larry closed out his entire position in the shares before the end of the year and stayed out of the stock for the required 30-day period, the wash-sale transactions actually become meaningless, and Larry can compute his gains and losses as he regularly would.

One final note: The wash-sale provisions work on shares that you sell for a loss, but there are no corresponding provisions for stock that you sell at a gain and then immediately repurchase. So although wash-sale losses can't be claimed, gains can't be avoided. That is, if you sell stock for a gain and buy it right back, you must still report the entire gain -- no special gain-deferral rule applies.

Here is a thorough explanation from The Motley Fool that also provides examples of the various scenarios involving wash sales and when disallowed deductions must to be carried forward:

https://www.fool.com/taxes/wash-sales-and-worthless-stock.aspx

Under the wash-sale rules, if you sell stock for a loss and buy it back within 30 days before or after the loss-sale date, the loss cannot be immediately claimed for tax purposes.

This rule is designed to prevent you from selling stock to claim the loss and then buying it back within a short period of time to retain ownership. The rule applies to a 30-day period before or after the sale date to prevent "buying the stock back" before it's even sold.

You get to claim the loss -- just not now. Although the loss can't be claimed on a wash sale, the disallowed amount is added to the cost of the repurchased stock. So the loss can be claimed when the stock is finally disposed of, other than in a wash sale.

Example: Larry Laundry buys 500 shares of XYZ Corp. for $10,000 and sells them on June 5 for $3,000. On June 30, he buys 500 shares of XYZ for $3,200. Since the stock was repurchased within 30 days of loss-sale date, the wash-sale rules apply. Larry can't claim his $7,000 loss. Instead, he must adjust his basis in the repurchased shares. His basis in his new 500 shares is $10,200 -- the actual cost plus the $7,000 disallowed loss.

Larry would also be in violation of the wash-sale rules if he purchased his new shares on June 1 and then made the loss sale on June 5. Remember, the rule is 30 days before or after the date of the loss sale. But also remember that if Larry had waited for the required 30 days before he purchased another 500 shares, there would be no wash sale.

Buying fewer shares What if you repurchase fewer shares than you originally sold for a loss? Is all of the loss disallowed? Nope. Only the portion of the loss attributable to the "washed" shares will be disallowed.

Thus, in the above example, if Larry had bought back only 300 of the 500 shares (60%), he would be able to claim 40% of the loss on the sale ($2,800). The remaining $4,200 of the loss disallowed under the wash-sale rules would be added to Larry's cost of the 300 shares, and Larry's basis in the new shares would be $6,120 -- the cost of the original 300 shares of $1,920 plus the disallowed loss of $4,200.

Larry certainly has a wash sale in the example above. But let's say that Larry tires of his position in XYZ and sells his 500 shares on Dec. 20 of the same year for $4,000. Larry's adjusted basis in the shares is $10,200 based on his wash-sale computations, and his overall loss would amount to $6,200.

But if you break down the two separate buy and sell transactions, you see that Larry generated a loss of $7,000 on the first transaction and a gain of $800 on the second transaction -- for a net loss of $6,200. This, amazingly, is the same amount of loss Larry computes when taking the wash-sale and basis-adjustment rules into account. So, since Larry closed out his entire position in the shares before the end of the year and stayed out of the stock for the required 30-day period, the wash-sale transactions actually become meaningless, and Larry can compute his gains and losses as he regularly would.

Under the wash-sale rules, if you sell stock for a loss and buy it back within 30 days before or after the loss-sale date, the loss cannot be immediately claimed for tax purposes.

This rule is designed to prevent you from selling stock to claim the loss and then buying it back within a short period of time to retain ownership. The rule applies to a 30-day period before or after the sale date to prevent "buying the stock back" before it's even sold.

This might sound outrageously unfair to you. After all, if your money was plunked into the stock and your dollars were lost, how can it be that you're not allowed to claim the loss?

Well, you do get to claim the loss -- just not now. Although the loss can't be claimed on a wash sale, the disallowed amount is added to the cost of the repurchased stock. So the loss can be claimed when the stock is finally disposed of, other than in a wash sale.

Example: Larry Laundry buys 500 shares of XYZ Corp. for $10,000 and sells them on June 5 for $3,000. On June 30, he buys 500 shares of XYZ for $3,200. Since the stock was repurchased within 30 days of loss-sale date, the wash-sale rules apply. Larry can't claim his $7,000 loss. Instead, he must adjust his basis in the repurchased shares. His basis in his new 500 shares is $10,200 -- the actual cost plus the $7,000 disallowed loss.

Larry would also be in violation of the wash-sale rules if he purchased his new shares on June 1 and then made the loss sale on June 5. Remember, the rule is 30 days before or after the date of the loss sale. But also remember that if Larry had waited for the required 30 days before he purchased another 500 shares, there would be no wash sale.

Buying fewer shares What if you repurchase fewer shares than you originally sold for a loss? Is all of the loss disallowed? Nope. Only the portion of the loss attributable to the "washed" shares will be disallowed.

Thus, in the above example, if Larry had bought back only 300 of the 500 shares (60%), he would be able to claim 40% of the loss on the sale ($2,800). The remaining $4,200 of the loss disallowed under the wash-sale rules would be added to Larry's cost of the 300 shares, and Larry's basis in the new shares would be $6,120 -- the cost of the original 300 shares of $1,920 plus the disallowed loss of $4,200.

Clearly, if you're doing a bunch of trading in a specific stock (that's not very Foolish, by the way), the wash-sale rules can really complicate things.

Burning bridges But -- and this is a very big "but" -- the wash-sale rules don't apply if you close out your entire position in the stock before the end of the year and then stay out of the stock for the required 30-day period before or after the date of the loss sale.

Let's look at Larry again. He certainly has a wash sale in the example above. But let's say that Larry tires of his position in XYZ and sells his 500 shares on Dec. 20 of the same year for $4,000. Larry's adjusted basis in the shares is $10,200 based on his wash-sale computations, and his overall loss would amount to $6,200.

But if you break down the two separate buy and sell transactions, you see that Larry generated a loss of $7,000 on the first transaction and a gain of $800 on the second transaction -- for a net loss of $6,200. This, amazingly, is the same amount of loss Larry computes when taking the wash-sale and basis-adjustment rules into account. So, since Larry closed out his entire position in the shares before the end of the year and stayed out of the stock for the required 30-day period, the wash-sale transactions actually become meaningless, and Larry can compute his gains and losses as he regularly would.

One final note: The wash-sale provisions work on shares that you sell for a loss, but there are no corresponding provisions for stock that you sell at a gain and then immediately repurchase. So although wash-sale losses can't be claimed, gains can't be avoided. That is, if you sell stock for a gain and buy it right back, you must still report the entire gain -- no special gain-deferral rule applies.

Under the wash-sale rules, if you sell stock for a loss and buy it back within 30 days before or after the loss-sale date, the loss cannot be immediately claimed for tax purposes.

This rule is designed to prevent you from selling stock to claim the loss and then buying it back within a short period of time to retain ownership. The rule applies to a 30-day period before or after the sale date to prevent "buying the stock back" before it's even sold.

This might sound outrageously unfair to you. After all, if your money was plunked into the stock and your dollars were lost, how can it be that you're not allowed to claim the loss?

Well, you do get to claim the loss -- just not now. Although the loss can't be claimed on a wash sale, the disallowed amount is added to the cost of the repurchased stock. So the loss can be claimed when the stock is finally disposed of, other than in a wash sale.

Example: Larry Laundry buys 500 shares of XYZ Corp. for $10,000 and sells them on June 5 for $3,000. On June 30, he buys 500 shares of XYZ for $3,200. Since the stock was repurchased within 30 days of loss-sale date, the wash-sale rules apply. Larry can't claim his $7,000 loss. Instead, he must adjust his basis in the repurchased shares. His basis in his new 500 shares is $10,200 -- the actual cost plus the $7,000 disallowed loss.

Larry would also be in violation of the wash-sale rules if he purchased his new shares on June 1 and then made the loss sale on June 5. Remember, the rule is 30 days before or after the date of the loss sale. But also remember that if Larry had waited for the required 30 days before he purchased another 500 shares, there would be no wash sale.

Buying fewer shares What if you repurchase fewer shares than you originally sold for a loss? Is all of the loss disallowed? Nope. Only the portion of the loss attributable to the "washed" shares will be disallowed.

Thus, in the above example, if Larry had bought back only 300 of the 500 shares (60%), he would be able to claim 40% of the loss on the sale ($2,800). The remaining $4,200 of the loss disallowed under the wash-sale rules would be added to Larry's cost of the 300 shares, and Larry's basis in the new shares would be $6,120 -- the cost of the original 300 shares of $1,920 plus the disallowed loss of $4,200.

Clearly, if you're doing a bunch of trading in a specific stock (that's not very Foolish, by the way), the wash-sale rules can really complicate things.

Burning bridges But -- and this is a very big "but" -- the wash-sale rules don't apply if you close out your entire position in the stock before the end of the year and then stay out of the stock for the required 30-day period before or after the date of the loss sale.

Let's look at Larry again. He certainly has a wash sale in the example above. But let's say that Larry tires of his position in XYZ and sells his 500 shares on Dec. 20 of the same year for $4,000. Larry's adjusted basis in the shares is $10,200 based on his wash-sale computations, and his overall loss would amount to $6,200.

But if you break down the two separate buy and sell transactions, you see that Larry generated a loss of $7,000 on the first transaction and a gain of $800 on the second transaction -- for a net loss of $6,200. This, amazingly, is the same amount of loss Larry computes when taking the wash-sale and basis-adjustment rules into account. So, since Larry closed out his entire position in the shares before the end of the year and stayed out of the stock for the required 30-day period, the wash-sale transactions actually become meaningless, and Larry can compute his gains and losses as he regularly would.

One final note: The wash-sale provisions work on shares that you sell for a loss, but there are no corresponding provisions for stock that you sell at a gain and then immediately repurchase. So although wash-sale losses can't be claimed, gains can't be avoided. That is, if you sell stock for a gain and buy it right back, you must still report the entire gain -- no special gain-deferral rule applies.