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A wash sale occurs when an investor sells an asset for a loss but repurchases it within 30 days. The wash-sale rule applies to stocks, bonds, mutual funds, ETFs, options and futures but not yet to ...
Wash sale rules don't apply when stock is sold at a profit. [4] A related term, tax-loss harvesting is "selling an investment at a loss with the intention of ultimately repurchasing the same investment after the IRS 's 30 day window on wash sales has expired".
But swapping an index fund for an ETF that tracks that same index would run afoul of the wash-sale rule, in that they’re substantially identical securities. In that instance, the IRS would disallow the loss. And if you wait 30 days after selling the losing security, you can replace it with the very same security and still claim the loss.
Most simply, if "tax-loss harvesting is not done properly, it will create a wash-sale that will eliminate the tax benefits of the buying and selling". [9] The investor can employ a number of techniques to avoid triggering the wash sale rule. The investor can wait 30 days to repurchase the security. [10]
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A wash sale occurs when you sell an asset for a loss but have purchased the same asset within 30 days before or after the sale. Wash sales are specifically excluded from being claimed on your return.
Special wash sale rules apply if the same or substantially similar asset is bought, acquired, or optioned within 30 days before or after the sale. [4] According to 26 U.S.C. §121, a capital loss on the sale of a primary residence is generally tax-exempt. [citation needed]. IRC 165(c) is a stronger source that limits the loss on the sale of a ...
To avoid the wash-sale rule, you cannot buy the same stock for 30 calendar days before and after the day you sell. The day on which you sell is not counted as one of the 30 calendar days.