Truth 37. Wash sale rules
Sometimes stock transactions make you want to wash your hands of all investing. Other times, you’re more philosophic and view gains and losses that “wash each other out” as just part of the process.
But if you try to time a stock sale and repurchase to take a tax loss but hang onto the asset or one similar to it, the IRS will crack down on you for violating its “wash sale rule.”
The rule was created to keep investors from gaming the tax and investment systems. Here’s what the IRS wants to prevent:
You own a stock that you believe will, in the long term, be a good investment. However, at the moment, it has dropped in value so that if you sell it, you can use it as a capital loss against gains or ordinary income. ...
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