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Let us say I made a poor investment and lost 10K. Let us also say that I have not realized any profits in that tax year and don't need to draw on my investments. For the sake of argument let us also ignore deductions from ordinary income.

Let us say that I have 1000 shares of another stock that I bought for $10 each. Since then the stock price has shot up to $30. What are the tax implications of selling 500 shares at $30 and then repurchasing them at the same price?

I'm guessing now I will have two lots of shares. Now if in some subsequent year the share price goes up to $40 and now I want to take profits for real. I would be paying taxes on 500 ( $40 - $10 ) + 500 ( $40 - $30 ) = 500 ( $30 + $10 ) = $20K as opposed to 1000 ( $40 - $10 ) = $30K.

Is this correct, or is there something like a wash rule to prevent this sort of thing?

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    I don't get it... What are the tax implications of selling 500 shares at $30 and then repurchasing them at $10? - are you expecting the stock to drop from $30 to $10?
    – littleadv
    Feb 8 at 22:38
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    Sorry, I meant to say the same price, corrected the question
    – kaan_a
    Feb 8 at 22:46
  • Oh, so you're asking about tax loss harvesting :)
    – littleadv
    Feb 8 at 22:55
  • Your calculations is correct and there is no wash sale issue. Feb 9 at 0:16
  • What country's tax laws are you asking about? There are country tags. Feb 9 at 1:56

1 Answer 1

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(Assuming US law based on the use of $)

You're describing Tax Gain Harvesting. There is no wash rule in the US for gains, only losses. It's perfectly acceptable to realize gains and repurchase in order to offset losses, just not the other way around.

With losses, you have to wait 30 days to repurchase equivalent securities, or else the loss is added to the new cost basis, which defers the loss until you sell the repurchased securities.

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  • You correctly answered the question as asked. I think that it would be helpful to those learning about wash sales that the repurchase also applies to 30 days before realizing the loss. And for the icing on the cake, beware of DRIP purchases as well. Feb 9 at 0:15

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