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A wash sale is when you sell an asset, such as a stock or bond, for a loss but have purchased the same asset or a very similar one within 30 days before or after the sale.
After a sale is identified as a wash sale and if the replacement stock is bought within 30 days before or after the sale then the wash sale loss is added to the basis of the replacement stock. The basis adjustment preserves the benefit of the disallowed loss; the holder receives that benefit on a future sale of the replacement stock.
The total sale amount is $1,500 (50 shares x $30). ... you’re essentially using that income to purchase more shares of the stock. Your cost basis goes up because the reinvested dividends are ...
If you sell securities and your sale price is lower than your cost basis, you have a capital loss. That loss, in turn, can help offset taxable gains elsewhere in your portfolio. (With many mutual funds again poised to make big capital gains distributions in 2024, those losses could come in handy.)
The cost basis of an asset is important to you for two primary reasons – tax planning and investment planning. These two reasons are related because only with the proper investment planning can ...
The reduction in basis occurs whether or not the business claims the depreciation. If the business then sells the asset for a gain (that is, for more than its adjusted cost basis), this part of the gain is called depreciation recapture. When selling certain real estate, it may be treated as capital gain.
The original basis of an asset is usually the value of a taxpayer's investment in the asset. (See IRC § 1012). When a taxpayer purchases an asset, the original basis is the purchase price, or cost, of the asset. Different factors, including tax deductions for depreciation, can lead to an adjusted or recomputed basis for the asset.
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.