What is the wash sale rule?
The wash sale rule is a regulation that prevents taxpayers from claiming a tax deduction for a security sold at a loss if they repurchase the same or substantially identical security within 30 days.
Why was the wash sale rule created?
It was created to prevent investors from taking tax deductions on losses while still maintaining their investment positions, which could lead to tax avoidance.
How can I avoid triggering the wash sale rule?
To avoid triggering the wash sale rule, you can wait at least 31 days before repurchasing the same security or consider buying a different security.
What are the consequences of violating the wash sale rule?
If you violate the wash sale rule, the IRS disallows the loss deduction, and the disallowed loss is added to the cost basis of the repurchased security.
Can you give me an example of a wash sale?
Sure! If you sell 100 shares of Company A at a loss and buy the same 100 shares back within 30 days, that's a wash sale.
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