A wash sale (not to be confused with a wash trade), also known as Bed and breakfasting, is a sale of a security (stock, bonds, options) at a loss and repurchasing the same or substantially identical stock shortly before or after. The idea is to make an unrealized loss claimable as a tax deduction, by offsetting against other capital gains in the current or future tax years. The security is repurchased in the hope that it will recover its previous value.
In some tax codes, such as the USA and the UK, tax rules have been introduced to disallow the practice, e.g., if the stock is repurchased within 30 days of its sale. The disallowed loss is added to the basis of the newly acquired security.
Read more about Wash Sale: Identifying A Wash Sale, Consequences of A Wash Sale
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