Wash Sale Rules Explained

Summary

A wash sale is a loss sale followed by buying or rebuying substantially identical securities within the relevant 30-day window before or after the sale. It can change how a tax loss is treated.

Definition

The article defines a wash sale as selling at a loss and then purchasing or repurchasing substantially identical securities within the relevant 30-day window before or after that sale. The importance of the rule in this context is that high-turnover trading can create more frequent sales and repurchases, making tax treatment more complicated than a simple gain-or-loss tally might suggest. The article does not go beyond that basic explanation, but it uses the concept to illustrate that tax friction is part of the workflow difference between short-term trading and longer-term investing. Traders should therefore not assume that every realised loss will automatically be usable in the way they expect.

Sources

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