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. Wash

    A series of transactions that results in a zero net sum gain. ...
  2. Wash-Sale Rule

    An Internal Revenue Service (IRS) rule that prohibits a taxpayer ...
  3. Crystallization

    The act of selling and buying stocks almost instantaneously in ...
  4. Daisy Chain

    A group of unscrupulous investors who, practicing a kind of fictitious ...
  5. Paper Profit (Paper Loss)

    Unrealized capital gain (or capital loss) in an investment. It ...
  6. Bond Swap

    Selling one debt instrument in order to use the proceeds to purchase ...
Related Articles
  1. Benefits Abound For Active Traders Who ...
    Trading Strategies

    Benefits Abound For Active Traders Who ...

  2. What's a Marginal Tax Rate?
    Personal Finance

    What's a Marginal Tax Rate?

  3. How are savings bonds taxed?
    Taxes

    How are savings bonds taxed?

  4. Where NOT To Invest in Latin America
    Economics

    Where NOT To Invest in Latin America

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center