Wash Sale

AAA

DEFINITION of 'Wash Sale'

A transaction where an investor sells a losing security to claim a capital loss, only to repurchase it again for a bargain. Wash sales are a method investors employ to try and recognize a tax loss without actually changing their position.

INVESTOPEDIA EXPLAINS 'Wash Sale'

The effectiveness of this strategy has been greatly diminished with the implementation of the IRS 30-day wash rule, where a taxpayer cannot recognize a loss on an investment if that investment was purchased within 30 days of sale (before or after sale).

RELATED TERMS
  1. Tax Selling

    A type of sale whereby an investor sells an asset with a capital ...
  2. Wash-Sale Rule

    An Internal Revenue Service (IRS) rule that prohibits a taxpayer ...
  3. Paper Profit (Paper Loss)

    Unrealized capital gain (or capital loss) in an investment. It ...
  4. Crystallization

    The act of selling and buying stocks almost instantaneously in ...
  5. Bond Swap

    Selling one debt instrument in order to use the proceeds to purchase ...
  6. Daisy Chain

    A group of unscrupulous investors who, practicing a kind of fictitious ...
RELATED FAQS
  1. What's the difference between regressive and progressive taxes?

    The U.S. federal tax system and local and state tax systems are complex in that they combine progressive, regressive and ... Read Full Answer >>
  2. What are the differences between regressive, proportional and progressive taxes?

    Tax systems fall into three main categories within the tax code: regressive, proportional and progressive taxes. Regressive ... Read Full Answer >>
  3. What are some examples of a value added tax?

    A value-added tax (VAT) is a consumption tax levied on products at every point of sale where value has been added, starting ... Read Full Answer >>
  4. What are common reasons for governments to implement tariffs?

    A tariff is a tax imposed by a governing authority on goods or services entering or leaving the country and is typically ... Read Full Answer >>
  5. What are the Basel III rules, and how does it impact my bank investments?

    The Basel III rules are a regulatory framework designed to strengthen financial institutions by placing guidelines pertaining ... Read Full Answer >>
  6. What are some of the arguments in favor of a value-added tax (VAT)?

    A value-added tax (VAT) offers several advantages over an income tax or traditional sales tax. It raises needed government ... Read Full Answer >>
Related Articles
  1. Trading Strategies

    Benefits Abound For Active Traders Who Incorporate

    Trading through a separate business structure allows active traders access to all of the tax mitigation and asset protection strategies available.
  2. Investing Basics

    What's the Primary Market?

    The primary markets are where investors can get first crack at a new security issuance.
  3. Taxes

    Are Taxes the Solution for Income Inequality?

    Income inequality continues to increase. Why? And are taxes the solution?
  4. Taxes

    Presidential Candidates And Wall Street In 2016

    Wall Street's influence will play a large role in the 2016 presidential race. As election season begins, candidates are showing their true colors.
  5. Taxes

    How The IRS Catches Tax Cheats & Liars

    When civil and criminal penalties don't deter people from skipping out on their taxes, the IRS has other tools it can use.
  6. Taxes

    Tips on Charitable Contributions: Limits and Taxes

    An overview of the limits and tax deductions of charitable donations.
  7. Taxes

    When Is Dual Citizenship Not A Good Idea?

    It may sound useful, but there are a number of reasons that make dual citizenship a questionable choice.
  8. Savings

    How Microeconomics Affects Everyday Life

    Microeconomics is the study of how individuals and businesses make decisions to maximize satisfaction. Microeconomic principles can describe many everyday experiences. We use renting a New York ...
  9. Mutual Funds & ETFs

    Which ETF is the Best Bet: VTI or IWV?

    A look at two quality ETFs that offer diversification, low expense ratios, and exposure to the total market.
  10. Taxes

    Switzerland's Declining Tax Haven Appeal

    Switzerland's tax haven allure is being threatened by efforts by the US and other governments to make Swiss banks give up their much-vaunted secrecy.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center