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. Wash-Sale Rule

    An Internal Revenue Service (IRS) rule that prohibits a taxpayer ...
  2. Identity Theft

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

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

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

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

    A financial instrument that represents an ownership position ...
Related Articles
  1. 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.
  2. Investing

    Are You A Target For Identity Thieves?

    The Americans at highest risk for identity theft and identity fraud aren't the ones you most expect. See if you're on the high-risk list.
  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. Financial Advisor

    5 Ways to Avoid Identity Fraud

    Identity theft was the number one consumer complaint in 2014. Here are some ways you can protect yourself.
  6. Managing Wealth

    How to Recover From Identity Theft

    Identity theft isn't going away, and fixing it can take time and money. But doing nothing isn't an option. Rather than become a victim, it is time to take action.
  7. 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.
  8. Investing

    Avoid Becoming An Identity Thief's Next Victim

    Use these 7 techniques to keep yourself under the radar and out of the way of identity thieves.
  9. 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, ...
  10. 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?
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. Why would someone change their Social Security number?

    Learn the reasons a person might choose to change his Social Security number, including identity theft and abuse, and discover ... Read Answer >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. What is a "wash sale"?

    The Wash-Sale rule was established to disallow a loss deduction of a security sold, if within 30 days of the date of the ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center