Wash Sale

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Related to Wash Sales: wash trade

Wash Sale

The buying and selling of the same or a similar asset within a short period of time.

A fictitious type of arrangement whereby a Broker, upon receiving an order from one individual to purchase and an order from another individual to sell a certain amount of a particular stock or commodity, transfers it from one principal to the other and retains the difference in value.

For the purposes of Income Tax, losses on a wash sale of stock may not be recognized as capital losses if stock of equal value is obtained within thirty days prior or subsequent to the date of sale.

Various stock exchanges disallow this practice because the orders to buy and sell should be executed separately to the advantage of each of the broker's clients.

References in periodicals archive ?
The wash sales trap potentially applies to any disqualifying disposition in which an employee, within 30 days--before or after the stock sale--repurchases company shares.
Losses from wash sales will carryover to the next identical stock purchase until gains eliminate the loss or until the stock is sold outside of the 61-day period.
Accounting systems will have to track the securities that triggered the wash sale until the point where they are sold, and will have to make complex calculations that track the adjusted basis and the holding period.
FundTax relieves financial institutions from manually tracking wash sales while increasing efficiency and accuracy.
Not only can the Wash Sale Rule prevent you from taking a loss, but failing to account for wash sales can result in costly errors in cost basis calculations for both the stock sold at a loss and the security that triggered the wash sale," said Conlon.
Wash Sales -- GainsKeeper's FundTax provides full tracking of wash sale deferrals and reversals, holding period carry-over, and basis adjustment.
These solutions calculate, track and report corporate actions, cost basis, capital gains and losses, and wash sales.
Calculating wash sales on short and long trades, on unequal numbers of shares, across "substantially identical" securities such as options and underlying stocks, and across multiple brokerage accounts is a major headache for anyone trying to prepare their trader tax return.
Maxit reduces the complexity of the challenging investment tax decision process by analyzing actionable cost basis scenarios, simplifying tax reporting, eliminating the need for research on corporate actions and identifying wash sales.
We get countless questions from people struggling to comply with the wash sale rule and other tax laws for capital gains," says Kaye Thomas, author of the book "Capital Gains, Minimal Taxes" and founder of Fairmark Press.
Every merger, split, or other corporate action changes a share's cost basis, as does any wash sales that may have been generated during the course of trading the same security," Routh said.
The new functionality and improved reporting capabilities enable State Street's customers to perform tax-efficient lot selection on lot-level holdings adjusted for wash sales.