i have an example

  1. Step 1: bought 1000 shares at 2$
  2. Step 2: Share price dropped to 1$ the same day and added another 1000 same day(averaging down)
  3. Step 3: Next day stock increased to 1.5$ i sold 1000 stock(my broker supports only FIFO-first in first out)
  4. Step 4: Next day stock dropped to 1$ i am not buying as it can lead to wash sale.
  5. Step 5: (QUESTION)if i buy this stock after 1 month will this trade triggers wash sale?
  • Yes my question is for USA stock market
    – user607749
    Commented Jan 21, 2022 at 12:23
  • 1
    "i am not buying as it can lead to wash sale" what do you think the effect of a wash sale is? Do you plan on keeping this stock past the end of the calendar year?
    – D Stanley
    Commented Jan 21, 2022 at 15:32
  • 4
    Step 3 was already the wash sale, so steps 4 and 5 are irrelevant.
    – user19035
    Commented Jan 21, 2022 at 15:54
  • @stanley-yes i would like to keep if can
    – user607749
    Commented Jan 21, 2022 at 15:58
  • Be careful that you don’t wag the dog with the tail - making a poor investment decision to save taxes is never a good thing. Also, make sure you understand about the wash sales – it doesn’t lose you money it just postpones tax realization of losses in the future
    – Aganju
    Commented Jan 23, 2022 at 4:26

2 Answers 2


If you realize a loss, you’ll have a wash sale you'll have to defer the loss if you acquire substantially identical stock within the 61-day wash sale period consisting of the day of the sale, the 30 days before the sale and the 30 days after the sale.

Your purchase of shares in 'Step 2' triggered a wash sale because it was within the 61 day window before/after realizing a loss. If your broker offered the ability to designate lots bot/sold and you realized a gain by combining steps 2 and 3 then it would not be a problem.

  • HUH? The wash-sale rule was established IRS to prevent taxpayers from being able to claim artificial LOSSES in order to maximize their tax benefits: A wash sale occurs when you sell or trade stock or securities at a LOSS and within 30 days of the sale (either before or after), you purchase the same—or a "substantially identical"—investment. If you designate the lots, claim a gain, and you have to pay taxes on that gain, the IRS has no problem with you. There's NO REALIZED LOSS. Commented Jan 21, 2022 at 20:15
  • Just for context, my above comment was in reply to @David Schwartz who has since deleted his incorrect statements about what a wash sale is. Commented Jan 23, 2022 at 4:54
  • Actually, I misunderstood what you meant by "combining steps 2 and 3" and thought you were responding to the OP saying his broker only supported FIFO. Lot designation does not affect the wash sale rule. Commented Jan 26, 2022 at 11:31

No, it would not trigger a wash sale even if you bought the next day. Step 3 was already a wash sale, but it only matters if you hold the stock past the end of the year. If you sell the rest of the stock this year, all transactions are within the same tax year so the wash sale has no effect.

If you hold past the end of the year, the wash sale rule just defers the loss until you actually sell. The 0.50 loss this year will be applied to the cost basis of the remaining shares, so your cost basis for those shares will increase to $1.50. So it just means that you pay less tax on the gain (or can claim a loss) when you sell next year (or later).

Wash sales do not prevent losses - they just defer them. I would not consider the wash sale a reason not to buy the stock not if you think it will go up (which you obviously do or you wouldn't buy it. The only reason you would wait is if you intentionally sold in order to tax harvest and don't want to undo that.

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