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:
“You haf slafed your life away in de bosses’ mills and your fadhers before you and your kids after you yet. Vat is a man to do with seventeen-fifty a week? His wife must work nights to make another ten, must vork nights and cook and wash in day an’ vatfor? So that the bosses can get rich an’ the stockholders and bondholders. It is too much... ve stood it before because ve vere not organized. Now we have union... We must all stand together for union.”
—John Dos Passos (1896–1970)
“People buy their necessities in shops and have to pay dearly for them because they have to assist in paying for what is also on sale there but only rarely finds purchasers: the luxury and amusement goods. So it is that luxury continually imposes a tax on the simple people who have to do without it.”
—Friedrich Nietzsche (1844–1900)