Wash Sale

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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.

BREAKING DOWN '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).

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