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I am a a little confused with the wash rule statement that says "buying a share 30 days before or after". I understand the after. But the before is confusing.

As an example:

  • I buy 100 shares of A for $100 in Jan 1st

  • I sell all 100 shares of stock A for $140 in Jan 2nd

  • I re-purchase 100 shares of A for $130 on Jan 10th

  • I sell 100 shares of A for $100 on Jan 11th

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I have to pay capital gains for Jan 1st to 2nd transaction. But can I get the loss for Jan10th to Jan11th transaction? Or is it disallowed by wash rule?

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    You always get the loss, even if the wash sale rule applies. It just gets carried over to the basis of the matching purchase and so you can't actually deduct it until you sell. In your case, you already sold and it's in the same year, so I don't think it would make any difference at all.
    – David Schwartz
    Sep 12, 2016 at 17:50
  • The wash sale involves "replacement shares". There are none here since the first trade has been closed.
    – Bob Baerker
    Feb 1 at 14:53

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The rule defines a wash sale as one that occurs when an individual sells or trades a security at a loss, and within 30 days before or after this sale, buys a “substantially identical” stock or security, or acquires a contract or option to do so. http://www.investopedia.com/terms/w/washsalerule.asp

Doesn't matter whether purchase or sale happened first, wash sale rules apply

In your example you would have a net gain from the two sales so it wouldn't matter.

Let's use a different example. Let's say I buy stock XYZ in January. 100 shares at $30/share. Now December comes around and it's down to 20/share so on December 20th I sell so I can write off the loss on my taxes. Now on the 21st I buy those shares back for 20/share. Wash sale rules prevent me from writing off the loss on my taxes, instead I must adjust the basis of my new shares. The same would be true if instead I had bought 100 now shares on the 20th and sold 100 a day later in the 21st. Wash sale rules would still prevent me from counting that loss.

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  • Thanks @homer150mw. It makes sense. I assume if in my example the second sale on Jan 11th was for $80, I will report $40 profit for first sale and $50 loss for second sale -will have a net loss - and no wash rule comes into picture? (Though the identical security was bought less than 30 days before Jan 11th- they were sold at a profit and not really a replacement, right?)
    – Ramesh Chander
    Sep 12, 2016 at 20:45
  • @Ramesh Chander in your example you closed the position both times, wash sale will apply if you reopen the position within 30 days otherwise you are fine
    – homer150mw
    Sep 13, 2016 at 10:41

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