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What is a wash sale?
What is a wash sale?
- A sale of a security followed by the purchase of any securities within a 61-day period
- A sale of a security followed by the purchase of substantially identical securities within a 30-day period
- A sale of a security followed by the purchase of substantially identical securities within a 61-day period (correct)
- A sale of a security followed by the purchase of any securities within a 30-day period
What is the purpose of the wash sale rule?
What is the purpose of the wash sale rule?
- To discourage taxpayers from investing in the stock market
- To increase tax revenue for the government
- To prevent taxpayers from claiming artificial losses for tax purposes (correct)
- To encourage taxpayers to invest in new securities
Does the wash sale rule apply only to losses or also to gains?
Does the wash sale rule apply only to losses or also to gains?
- None of the above
- Only losses
- Both losses and gains (correct)
- Only gains
What is the time period within which the purchase of substantially identical securities triggers the wash sale rule?
What is the time period within which the purchase of substantially identical securities triggers the wash sale rule?
What happens if you sell a security at a loss and then repurchase the same security within 30 days?
What happens if you sell a security at a loss and then repurchase the same security within 30 days?
Are there any exceptions to the wash sale rule?
Are there any exceptions to the wash sale rule?
Does the wash sale rule apply only to stocks or also to options?
Does the wash sale rule apply only to stocks or also to options?
What is the purpose of the wash sale rule?
What is the purpose of the wash sale rule?
What is an example of a wash sale?
What is an example of a wash sale?
What is the consequence of triggering the wash sale rule?
What is the consequence of triggering the wash sale rule?
What is the purpose of the wash sale rule?
What is the purpose of the wash sale rule?
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Study Notes
Wash Sale Rule
- A wash sale occurs when an investor sells a security at a loss and purchases a substantially identical security within 30 days.
Purpose of the Wash Sale Rule
- The purpose of the wash sale rule is to prevent investors from abusing the tax system by claiming a loss on a sale and then immediately repurchasing the same security.
Application of the Wash Sale Rule
- The wash sale rule applies to losses, not gains.
- The rule applies to both stocks and options.
Triggering the Wash Sale Rule
- Selling a security at a loss and repurchasing the same security within 30 days triggers the wash sale rule.
Consequences of Triggering the Wash Sale Rule
- If the wash sale rule is triggered, the loss on the original sale is disallowed for tax purposes.
Exceptions to the Wash Sale Rule
- There are some exceptions to the wash sale rule, but these have not been specified in the text.
Examples of a Wash Sale
- Selling 100 shares of XYZ stock at a loss and buying 100 shares of XYZ stock within 30 days is an example of a wash sale.
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