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A wash sale occurs when both of these apply:
If a wash sale occurs, you can’t deduct the loss on your return. However, gain on a wash sale is taxable.
The wash-sale rules are designed to prevent people from selling investments and then buying the same stock back. They do this for the sole purpose of:
You can't sell a stock or mutual fund at a loss and then buy it again it within 30 days just to claim the losses.
You’ll need to figure the basis for shares sold in a wash sale. When you do, add the amount of disallowed loss to the basis of the shares that caused the wash sale. These are the new shares you acquired. By doing this, you defer the loss, but it’s not totally disallowed.
You also have a wash sale if both of these apply:
Also, you might have bought fewer shares of stock or securities than you sold. If so, only the number of shares you bought is subject to the wash-sale rules.
Report wash sales on Form 8949. Or, in the H&R Block online program, go to Sale of Stocks. For the disposition type, choose Wash Sale. The program will calculate it for you.
For shares you sold that aren’t subject to the wash sale rules, report the sale as an ordinary transaction.
To learn more about identical stocks and securities, see Publication 550: Investment Income and Expenses at www.irs.gov.