Question
What is a wash sale?
Answer
The IRS created the wash sale rule under Section 1091 to prevent investors from recognizing "artificial" losses by selling a stock for a loss, and then repurchasing the stock within a short period of time. The wash sale "window" starts 30 days prior to the sale, includes the date of sale, and ends 30 days after the sale - for a total of 61 days. If an investor sells the stock at a loss, and then buys a "substantially identical" replacement stock within this 61-day window, the loss is deferred until the replacement shares are sold. Click here for more information on wash sales.