Substantially Identical Security

DEFINITION of 'Substantially Identical Security'

A security that is so similar to another that the Internal Revenue Service (IRS) does not recognize a difference between the two. Substantially identical securities can include both new and old securities issued by a corporation that has undergone reorganization. Convertible securities and common stock of the same corporation can also fall into this category if the market and conversion prices are similar.

BREAKING DOWN 'Substantially Identical Security'

Substantially identical securities cannot be used in tax swaps to create capital losses. Securities used in swaps must be similar but not substantially identical; if they are, the IRS will consider the transaction to be a wash sale, and will disallow it.

RELATED TERMS
  1. Identity Theft

    The crime of obtaining the personal or financial information ...
  2. Generic Securities

    A security backed by recently issued loans or mortgages. Its ...
  3. Social Identity

    A company's image as derived from its relationships. An organization's ...
  4. Tax Swap

    A method of crystallizing capital losses by selling losing positions ...
  5. Security

    A financial instrument that represents an ownership position ...
  6. Synthetic Identity Theft

    A type of fraud in which a criminal combines real (usually stolen) ...
Related Articles
  1. Personal Finance

    How Taxpayers Can Do A Legal Wash Sale

    The wash sale rule can result in the disallowance of a much-needed deduction. Here you can learn what constitutes a wash sale and how to avoid it.
  2. Managing Wealth

    How to Avoid Violating Wash Sale Rules When Realizing Tax Losses

    How to avoid violating the IRS wash sale rules when realizing capital losses in your taxable investment account.
  3. Personal Finance

    Protect Your Kids Against Identity Theft

    Children have valid Social Security numbers and no debt, which makes them ideal targets. Here’s what parents can do to prevent a scam.
  4. Investing

    Understanding Brand Identity

    A brand identity comes from visible elements, such as the company name, the design of its logo, its packaging design, and colors, tagline and typeface.
  5. Investing

    This is the Fastest-Growing Consumer Complaint

    There’s no way to guarantee that your Social Security number won’t fall into the wrong hands. Here are some ways to make yourself less of a target.
  6. Trading

    What's a Marketable Security?

    Marketable securities are financial instruments that can be readily bought and sold in a public market. The key feature is the ease with which it can be sold and converted into cash. Usually, ...
  7. Retirement

    10 Ways to Protect Your Social Security Number

    Identity theft thrives in part because people must give their Social Security number for so many types of interactions. How can you protect yourself?
  8. Investing

    Identity Theft: Who To Call For Help

    If your identity is stolen, it's critical to act fast. Find out what to do if it happens.
  9. Investing

    Identity Theft Protection Services: Worth Having?

    A detailed review of what you get from American's leading identity theft protection agencies. Start here before deciding whether you need this coverage.
  10. Financial Advisor

    Top Hacks to Protect Clients from Tax Scams

    There are many ways that clients can be victimized in today’s digital world, but there are also many ways to protect against these invasions. Here are some.
RELATED FAQS
  1. What are the characteristics of a marketable security?

    Find out what it takes for a financial asset to be considered a marketable security, including its liquidity, intent of use ... Read Answer >>
  2. What's the difference between primary and secondary capital markets?

    Learn how in the primary capital market, securities are issued for the first time, while in the secondary market, investors ... Read Answer >>
  3. Is it possible for a 79 year old married person to legally stop paying taxes on social ...

    I am 79 years old and my wife is 78 years old (working part time). I am drawing two Social Security checks, a small retirement, ... Read Answer >>
  4. Does working capital include marketable securities?

    Learn how marketable securities such as Treasury bills (T-bills) and commercial papers are part of current assets and the ... Read Answer >>
  5. Do traders, market makers, specialists or others ever deliberately drive a stock's ...

    Many individual investors have had the experience of closing their position in a stock only to see the price rebound moments ... Read Answer >>
  6. How do I evaluate a debt security?

    Look at a brief overview of the important factors to consider before purchasing a debt security, such as a corporate or government ... Read Answer >>
Hot Definitions
  1. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  2. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  3. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  4. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  5. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
  6. Security

    A financial instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship ...
Trading Center