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:
“It is not a man’s duty, as a matter of course, to devote himself to the eradication of any, even the most enormous, wrong; he may still properly have other concerns to engage him; but it is his duty, at least, to wash his hands of it, and, if he gives it no thought longer, not to give it practically his support.”
—Henry David Thoreau (1817–1862)
“I hate this shallow Americanism which hopes to get rich by credit, to get knowledge by raps on midnight tables, to learn the economy of the mind by phrenology, or skill without study, or mastery without apprenticeship, or the sale of goods through pretending that they sell, or power through making believe you are powerful, or through a packed jury or caucus, bribery and “repeating” votes, or wealth by fraud.”
—Ralph Waldo Emerson (1803–1882)