Series 99: 2.5.8 Wash Sale Rules

Taken from our Series 99 Top-off Online Guide

2.5.8  Wash Sale Rules

While losses can almost always be used to offset gains, there is a limitation. When an investor sells securities at a loss and then buys back the same or substantially identical securities within 30 days, the investor cannot use the loss to offset gains. This is considered a wash sale, according to IRS rules. Moreover, the investor could not have purchased replacement securities 30 days before the sale either—this would also be considered a wash sale because the investor is replacing the shares that he is selling at a loss. Thus, the wash sale period is 30 days before the trade and 30 days after the trade plus the day of the trade.

Keep in mind that a wash sale is not illegal; rather, it is using the loss from a wash sale to offset gains that is a violation of IRS rules. In fact, the investor can capture the loss later by adding it to the cost basis of the new securities. If an investor does implement

Since you're reading about Series 99: 2.5.8 Wash Sale Rules, you might also be interested in:

Solomon Exam Prep Study Materials for the Series 99
Please Enable Javascript
to view this content!