In the stock market, what is the "wash" rule?

Question

In the stock market, what is the "wash" rule?

Answer 1

The simple explaination....

If you have a stock, and sell it at a loss....then buy that same stock again within 30 days, the wash rule says you can not deduct that original loss for tax purposes.

In reality it usually doesn't matter, because you can add that "loss" to the cost basis of the re-bought stock.

Example (from site referenced in souce below):

Some time ago you bought 80 shares of XYZ at $50. The stock has declined to $30, and you sell it to take the loss deduction. But then you see some good news on XYZ and buy it back for $32, less than 31 days after the sale.

You can't deduct your loss of $20 per share. But you add $20 per share to the basis of your replacement shares. Those shares have a basis of $52 per share: the $32 you paid, plus the $20 wash sale adjustment. In other words, you're treated as if you bought the shares for $52. If you end up selling them for $55, you'll only report $3 per share of gain. And if you sell them for $32 (the same price you paid to buy them), you'll report a loss of $20 per share.

Answer 2

If you buy a stock then sell it, and then buy it again and then sold it within a short certain amount of months, I think it's 30 days??, then you are subject to a Wash meaning you will not be able to take a tax deduction for the loss you had during the 2nd selling(??) not sure it's all or just the 2nd selling....hope my info is somewhat correct, but the general gist is that.   Please consult the stock brokers of the company in which you use to trade.

Answer 3

Wash your hands before eating.