Quote:
Originally Posted by DAB
and don't forget the wash rule, where by you end up paying taxes on money you never made....glorious! the IRS loves that rule.
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This is not true. A "wash sale" occurs when you sell a stock at a loss, buy it back in 30 days or less, but still try to take the loss as a tax deduction.
Example: If you buy 500 shares of XOM for $100 per share, and later the price drops to $50 per share, people used to sell the shares today to take a loss of 500 shares x $50 loss per share is $25,000, then buy the shares back the next day at say $50. They would still have exactly what they had before, 500 shares of XOM, but your "new" shares would have a tax basis of $50 per share.
The IRS said "no" to that, and calls that trade a "wash sale". They say you have exactly what you had before, so from a tax standpoint, you should have what you had before, so they disallow the loss, and recognize you as having a $100 per share basis in your "new" shares.
If you sell at $50, and the next day the price jumps to $60, so you get excited and buy back in, this is still a wash sale, but now your basis will be $110 per share.