Understand the purpose of the wash sale treatment. The treatment effectively adds the loss of the first transaction to the cost basis of the second transaction within the 30-day wash period. Thus, the loss would serve to offset any gain in the second transaction by increasing the cost basis of the second transaction. Thus, for tax accounting purpose, the 2 transactions are combined into the second transaction. The tax treatment prevents the taking of a tax loss on a stock when rebuying the same stock within 30 days, netting the loss of the first transaction with any gain of the second transaction. Without the tax loss disallowance, someone could sell a stock for a loss at the short-term tax rate during a massive stock market decline, and then, within a few hours rebuy the stock and proceed to hold onto the repurchased stock for several years before selling it for a long-term gain (at the long-term tax rate that is lower than the short-term tax rate).
