In this case it’s clear the shares you have left after the sale weren’t bought to replace the shares you sold. The result should be different, though, if you gave a single buy order for 200 and your broker happened to execute it by buying two lots of 100 shares each. So the IRS will probably contend that the wash sale rule applies in this situation. In other words, you may have been trying to get the result the wash sale rule is designed to prevent. Within 30 days, you sell the morning shares at a loss.įor all we know, the price of this stock dropped between morning and afternoon, and your afternoon purchase is for the purpose of claiming a loss while maintaining your investment. You buy 100 shares of XYZ in the morning, and decide to buy another 100 shares in the afternoon of the same day. It’s clear the shares you have left after the sale weren’t bought to replace the shares you sold. Furthermore, although the IRS doesn’t say this, the result shouldn’t change if you gave a single buy order for 200 and your broker happened to execute it by buying two lots of 100 shares each. And the IRS agrees, in the situation where you bought the 200 shares in a single lot. But you probably still feel that the wash sale rule shouldn’t apply here. After the sale, you hold shares identical to the shares you sold, and you bought those shares less than 31 days before the sale. The answer here is a little less obvious. You continue to hold the other 100 shares. On June 1 you buy 200 shares of XYZ for $10,000. That’s true because you sold the same stock you bought. Your instincts are correct: the wash sale rule doesn’t apply because the stock you bought isn’t replacement stock for the stock you sold. You know instinctively it shouldn’t apply, even though there’s a purchase of identical stock less than 31 days before the sale. Most people wouldn’t even think about applying the wash sale rule here. On June 12 you sell all 200 shares for $8,000 (a loss of $2,000). In all of these examples, assume that there are no purchases or sales of stock other than those described. This rule is best understood through a series of examples. But the wash sale rule doesn’t apply if the stock you bought wasn’t replacement stock. In general, the wash sale rule prevents you from reporting a loss on the sale of stock if you acquired substantially identical stock on the same day as the sale, or within 30 days before or after that day.
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