When stocks are sold, it’s always a good idea to watch out for the wash-sale rules.
Simply put, if you sell stock or securities for a loss and buy substantially identical stock or securities back within the 30-day period before or after the sale date, the loss cannot be claimed for tax purposes. This applies to both the 30-day period before and after the sale.
Fortunately, your loss does not disappear; the disallowed amount is added to the cost of the new stock. Thus, the disallowed amount can be claimed when the new stock is finally disposed of (other than in another wash sale).
As you might expect with IRS, this rule apples only to losses and won’t work to avoid gain. So, if you sell stock for a gain and buy it right back, you must still report the gain in the year of sale.
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