@zpc74 wrote:
lawyer lingo. what is it in English?
Here's the wash sale rule as plain as I can make it.
Suppose you buy a share of stock in 2020 for $10. In 2022 it is worth $5. You sell it to claim a $5 tax deduction. You immediately re-buy the share for $5, and sell in in 2023 for $8. You may think you have a $5 loss you can deduct in 2022 and a $3 gain you report as income in 2023, but the wash sale rule means you ignore the loss in 2022, and report a $2 loss in 2023 ($8-$10 basis).
The wash sale rule is triggered if you sell an investment for a loss, and then rebuy the same or substantially similar investment within 31 days. The wash sale rule even applies if you sell a stock that is inside an IRA and re-buy it outside the IRA, or vice versa.
The rule is not triggered if you have a gain. Suppose you buy a share of stock in 2020 for $10. In 2022 it is worth $15 and you sell it. You immediately re-buy the stock, and in 2023 you sell it at $12. In this case you report the $5 capital gain as income in 2022 and the $3 loss in 2023.
