If I close a put position at a loss in an after-tax account and buy 1 share of the underlying in an IRA within 30 days, how much of the loss is permanently disallowed according to IRS wash sale rules?

Would it be all of it? Or 1% of the loss?

Concrete example:

After-tax Account

March 2 Sold 1 XYZ Mar 19 2021 185.0 Put @ 6.25

March 4 Bought 1 XYZ Mar 19 2021 185.0 Put @ 15.8

Net loss: $955


March 2 Buy 1 share XYZ XYZ INC CLASS A @ 193.25

  • why 1% specifically?
    – littleadv
    Apr 6, 2022 at 20:26
  • 1 contract controls 100 shares Apr 6, 2022 at 20:27

1 Answer 1


Congress enacted the wash sale rule to prevent traders from manipulating their tax burden by realizing security losses and re-entering a 'substantially identical' position in order to be able to participate in it’s price increase. Unfortunately, Congress never clearly defined what 'substantially identical' means.

The only way to avoid this complication is to make sure that you never have a carry over or disallowed wash sale violation. ​ As for your question, you would have to first determine if this was a 'substantially identical' replacement position. If so, I would 'guess' that the disallowance would be one percent since a standard option is for 100 shares but I don't know that for a fact.

  • Yes, if I sold short 100 shares and closed at a loss instead, one would reasonably only disallow the amount attributed to the 1 share in the IRA. No rule specifically, but that seems to be the spirit of the law. Apr 7, 2022 at 10:45
  • Tax rules clearly indicate that when the identical security is involved, the 60 day window applies to a realized loss (XYZ stock and XYZ stock). When not the same, determining what is substantially identical is the problem (XYZ stock and XYZ options). Apr 7, 2022 at 13:27
  • Ok, actually, I see in §1091 there is a portion about short sales. Apr 7, 2022 at 16:19

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