38 votes
Accepted

Would I be able to avoid the wash sale rule if I buy back the security on January 1st after selling it on December 31st?

No, that's the whole point of the wash sale rule, to keep people from realizing a loss at the end of the year for tax purposes without significantly changing their position. This assumes that you sold ...
D Stanley's user avatar
  • 135k
30 votes
Accepted

What's the point of the wash rule?

The point of the wash rule is to defer (not eliminate) the tax benefit of a sale until you close out the position that you opened after realizing the loss. In your example, you closed your re-opened ...
D Stanley's user avatar
  • 135k
24 votes
Accepted

Why does Canada's superficial loss rule also include a clause for "30 days before the sale"?

There is a simple reason why the the 30 day period extends in both directions. It becomes clear once you define the timeline of events. Lets pretend that the superficial sales rules didn't exist. Most ...
mhoran_psprep's user avatar
20 votes

Would I be able to avoid the wash sale rule if I buy back the security on January 1st after selling it on December 31st?

A wash sale violation occurs if you acquire a 'substantially identical' security within 60 days (30 before or 30 after) of realizing a loss. It doesn't matter whether it's in the same year or in two ...
Bob Baerker's user avatar
  • 76.4k
18 votes

What's the point of the wash rule?

The point of the wash trading rule [and similar variations in different jurisdictions] is to prevent someone from deferring gains and accelerating recognition of losses, for tax purposes. Without a ...
Grade 'Eh' Bacon's user avatar
13 votes
Accepted

Does the wash sale rule apply in reverse?

Yes, you will owe tax on the realized gain. But your newly-purchased shares will have a higher cost basis, potentially reducing the taxable gain of future sales (or increasing the deductible loss). ...
yoozer8's user avatar
  • 9,514
11 votes
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How to know if two ETFs are 'substantially identical' according to wash sale rules?

It sounds like this is an entirely unsettled question, unfortunately. In the examples you provide, I think it is safe to say that none of those are 'substantially identical'; a small overlap or no ...
Joe's user avatar
  • 35.8k
8 votes

Can I undo a wash sale?

Sure - the way the wash sale works is that your cost basis for the repurchased shares will be your original cost basis, so you can sell the repurchased shares, use the proceeds to buy a different ...
D Stanley's user avatar
  • 135k
8 votes
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Wash Sales and Day Trading

Great question! It can be a confusing for sure -- but here's a great example I've adapted to your scenario: As a Day Trader, you buy 100 shares of LMNO at $100, then after a large drop the same day, ...
JPStockhouse's user avatar
7 votes
Accepted

Does exchanging funds from an S&P 500 index fund into a Russell 3000 index fund at a loss constitute a "wash sale" if losses are claimed?

You are safe from considering it a wash sale. The two transactions are more than 61 days apart (December 31st 2017 to mid-March 2018); and the two funds are different. An S&P 500 fund is different ...
mhoran_psprep's user avatar
7 votes
Accepted

Wealthfront tax loss harvesting + Vanguard target date?

If you are worried about wash sales within your Wealthfront portfolio, it appears that you should be safe. According to Wealthfront, their harvesting algorithm avoids wash sales: Wealthfront’s tax-...
Stephen Grimes's user avatar
6 votes
Accepted

What is the purpose of the wash sale rule?

In a comment on this answer you asked It's not clear to me why the ability to defer the gains would matter (since you never materially benefit until you actually sell) but the estate step up in ...
Brythan's user avatar
  • 21k
6 votes

How to know if two ETFs are 'substantially identical' according to wash sale rules?

Nobody knows for sure what "substantially identical" means because the IRS hasn't officially defined it. Until they do so, it would come down to the decision of an auditor or a tax court. The rule of ...
Craig W's user avatar
  • 15.9k
6 votes

Why Wash-sale rule makes a difference?

Your wash sale example only has an impact if Day 3 and/or Day 4 are in January of the following year. If this all happened in June, there is no impact, you are right. If Day 3 or 4 are in January then ...
Hart CO's user avatar
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6 votes
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Are two options ever too similar for taxes?

In my opinon, https://fairmark.com/ is a reputable site for tax advice. Here's an abbreviated version of their take on the wash sale possibilities involving stock and options: If you sell a stock at ...
Bob Baerker's user avatar
  • 76.4k
6 votes

Does selling shares within 30 days of purchase count as a wash sale?

Addition: With this edit, I add a citation from a well known and highly respected source, instead of merely quoting my experience with the IRS. As the OP described his purchase, and the sale 15 days ...
ab2's user avatar
  • 1,900
6 votes
Accepted

Wash sale- Sell stock buy bonds?

This would not be a wash sale - bonds are "substantially different" from stocks, even of the same company. Unless the bonds are convertible to ordinary shares, in which case they may "...
D Stanley's user avatar
  • 135k
6 votes
Accepted

Can a wash sale exist across calendar years?

Yes - in fact that's the reason for the wash sale rule, to keep people from selling at the end of one year to claim a tax deduction for the realized loss, then rebuying at the beginning of the next ...
D Stanley's user avatar
  • 135k
6 votes

Why does Canada's superficial loss rule also include a clause for "30 days before the sale"?

The answer by mhoran_psprep gives a very good example, but I'll explain more about the rationale of the concept. Similarly to the US wash sale rules, in Canada the law prohibits tax loss harvesting as ...
littleadv's user avatar
  • 174k
5 votes

What is the purpose of the wash sale rule?

'Note that "to keep an investor from lowering their tax bill" is not an explanation'. Well, yes it is. In fact it is the only explanation. The rule plainly exists to prevent someone from realizing a ...
Grade 'Eh' Bacon's user avatar
5 votes

Is the wash sale rule canceled by something if you don't hold the stock in question for 30 days?

You are misunderstanding what constitutes a wash sale. In your example, the wash sale rules do not apply (as long as you don't buy the stock again for 30 days after the sale). Let's say that you ...
Ben Miller's user avatar
  • 116k
5 votes

Re-purchasing a stock at a loss. Re:IRA's

If you sell a security at a loss and buy the same or a substantially identical security within 30 calendar days before or after the sale, it triggers the wash-sale. It doesn't matter if the purchase ...
Bob Baerker's user avatar
  • 76.4k
5 votes
Accepted

Does wash-sale rule apply to my case?

Here is the timeline in your question: You on 18 August invested $19,000 in fund X via 2 different brokers. Ending up with Y shares of the fund. You on 19 August sold all Y shares of the at a loss of ...
mhoran_psprep's user avatar
5 votes

Why did Turbotax say that I made profit when I actually lost money?

That $11,740.00 under the wash sale loss disallowed column is the difference between the $9178 loss you were expecting to put on your tax form, and the $2562 in gain that your were able to put on your ...
mhoran_psprep's user avatar
5 votes

Does the wash sale rule apply in reverse?

A wash sale violation occurs if you acquire a 'substantially identical' security within 60 days (30 before or 30 after) of realizing a loss. It has nothing to do with realizing a gain. A wash sale ...
Bob Baerker's user avatar
  • 76.4k
5 votes

Most cost effective way to realize profits?

I.e., is there some way to "reset" the cost basis without actually selling the security? For some positions there is, for example PFIC MTM treatment. But these are exceptions, as a general ...
littleadv's user avatar
  • 174k
5 votes

In the US, which shares should I sell if I want to keep the most compounding effect?

Your question is lengthy so I feel like you are over complicating things. Generally, you want to sell losses first, then gains, while also taking short/long term holdings into consideration. This ...
Nosjack's user avatar
  • 8,697
4 votes
Accepted

Does wash sale apply if I sell stock in profit and within 30 days rebuy and sell it at loss?

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 ...
homer150mw's user avatar
  • 1,189
4 votes

Is this a wash sale?

No because the trades are more than 30 days apart. If the spring sell trade were within 30 days of the winter buy trade, it would be a wash sale. From Wikipedia: Under Section 1091, a wash sale ...
Charles Fox's user avatar
  • 2,779

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