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
Famous quotes containing the words wash and/or sale:
“[When asked: “If women voted, would they not have to sit on juries?”:] Many women would be glad of a chance to sit on anything. There are women who stand up and wash six days in the week at 75 cents a day who would like to take a vacation and sit on a jury at $1.50.”
—Anna Howard Shaw (1847–1919)
“I keep thinking that what I need
to do is buy my leg back.
Surely it is for sale somewhere,
poor broken tool, poor ornament.
It might be in a store somewhere beside a lady’s scarf.”
—Anne Sexton (1928–1974)