Wash Sale

Definition - What does Wash Sale mean?

A wash sale is when a person sells a stock at a loss only to repurchase it at a lower price very soon afterward.

In the context of the law, the "wash sale rule" does not allow investors to claim capital losses on stocks that they repurchase within 30 days. However, they can claim capital losses if the stock is repurchased after the 30-day period.

Justipedia explains Wash Sale

Many investors attempt to perform wash sales in order to maintain a similar position but avoid a loss on a stock. So, for example, an investor who holds 100 shares of stock A at $0 a share may attempt to sell these shares if they start going down in value, and then repurchase them at a much lower rate. If it weren't for the wash sale rule, investors who attempt to do this within 30 days would be able to also claim capital losses for their wash sales.

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