This is probably best illustrated with an example:
- Day 1: I buy 10x AAPL for $1000
- Day 2: I sell 10x AAPL for $2000 ($1k gain)
- Day 3: I buy 10x AAPL for $1000
- Day 4: I sell 10x AAPL for $500 ($500 loss)
- Day 5: I buy call LEAPS on AAPL and hold until next year
Come tax season next year, will I owe taxes on $1000 or $500? In other words, does the $500 wash sale get matched with my previous trade (which gets settled this year) or with the LEAPS (which won't be settled until the year I sell)?