What is a wash sale?

The Wash-Sale rule was created by the IRS to disallow the loss deduction from the sale of securities if repurchased by a seller or spouse within the Wash-Sale period.

The Wash-Sale period is defined as 30 days before and 30 days after the sale date, totaling 61 days (including the sale date). If the account purchased identical securities within this period, the loss amount will be added to the newly purchased lot.

Wash sale applies to stocks (long/short), options. DRIP will trigger wash sale. Day trade will trigger wash sale.

A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale when you:

• Buy substantially identical stock or securities;
• Acquire substantially identical stock or securities in a fully taxable trade;
• Acquire a contract or option to buy substantially identical stock or securities; or
• Acquire substantially identical stock for your Individual Retirement Account (IRA) or Roth IRA.

If you would like additional information about wash sales, please see IRS Publication 550.