IRS Rules on the Sale of a Stock and Reinvestment in Similar Investment

Federal tax rules provide advantageous tax treatment to investors who suffer losses on certain securities. To qualify for these benefits the investor must actually take the loss by selling the underlying security. A transaction in which a security is sold and the same or a substantially similar security is purchased within 30 days before or after the sale is considered a wash sale.

Substantially Identical

For a combination of sell and buy transactions to be considered a wash sale by the Internal Revenue Service (IRS), the underlying securities or stocks must be substantially identical, according to IRS Publication 550, Investment Income and Expenses. The stocks of different companies are typically not considered to be substantially identical even if both companies operate in the same industry. Bonds and preferred stocks are not considered to be substantially identical to the common stock of the same industry. Stock options are usually considered to be substantially identical to the common stock of the same company.

Replacement

A combination of sell and buy transactions that occur within 30 days is considered a wash sale when the buy transaction is intended as as a replacement for the sell transaction. The 30-day rule does not apply in transactions that do not involve replacing the shares that were sold. An investor may purchase securities or stocks and sell all or part of her investment within 30 days without the transactions resulting in a wash, because there was no replacement of the stock or security.

Different dates of purchase

Wash sales may apply to multiple transactions involving purchases of stocks or securities on different dates, even if certain purchases were prior to the 30-day limit. According to IRS Publication 550 an investor who purchased shares of stock, then purchased an equal number of shares of substantially identical stock 31 days later, then sold the original shares at a loss but maintained possession of the second stock purchase, would still be considered to have engaged in a wash sale and would not be permitted to claim the loss on his income tax return. Wash sales can be complicated. When in doubt investors should seek the counsel of a qualified accountant or tax attorney.

---

• Phoenix Arizona Business News - Phoenix Real Estate News ...

  www.azcentral.com/business

  Phoenix Arizona Business News - Breaking Arizona business and real estate news, as well as the latest housing, consumer, tech and finance news and video.

• 4. Sales and Trades of Investment Property - Internal Revenue Service

  www.irs.gov/publications/p550/ch04.html

  This chapter explains the tax treatment of sales and trades of investment property.

• IRS Revenue Ruling 59-60 - Equity Valuation Associates

  www.equityvaluationappraisals.com/pdf/IRS-Revenue-Ruling-59-60.pdf PDF file

  IRS Revenue Ruling 59-60 Rev. Rul. 59-60, 1959-1 CB 237 -- IRC Sec. 2031 (Also Section 2512.) (Also Part II, Sections 811(k), 1005, Regulations 105, Section 81.10.)

• IRA Rules for Selling Stocks & Reinvesting eHow

  www.ehow.com Retirement Planning 401ks & IRAs

  IRA Rules for Selling Stocks & Reinvesting. An Individual Retirement Arrangement (IRA) is a tax-sheltered structure that allows the IRA owner to save for retirement ...

• Internal Revenue Bulletin - November 22, 2010 - T.D. 9504

  www.irs.gov/irb/2010-47_IRB/ar08.html

  This document contains final regulations on broker reporting of sales of securities and on the basis of securities. These final regulations ...

• The Wash Sale Rule - Fairmark.com

  www.fairmark.com/capgain/wash

  The wash sale rule prevents you from claiming a loss on a sale of stock if you buy replacement stock within 30 days before or after the sale.

• Publication 550 - Investment Income and Expenses - Dividends

  taxmap.ntis.gov/taxmap/pubs/p550-006.htm

  IRS Topic Map ... If a mutual fund (or other regulated investment company) or real estate investment trust (REIT) declares a dividend (including any exempt-interest ...

• Reportable Transactions IRS Reportable Transactions BKD

  www.bkd.com/services/reportable-transactions.htm

  BKD can help your business work to adequately disclose reportable transactions to the IRS and help material advisors timely register transactions as required.

• Stock - Wikipedia, the free encyclopedia

  en.wikipedia.org/wiki/Stock

  The capital stock (or stock) of an incorporated business constitutes the equity stake of its owners. It represents the residual assets of the company that would be ...

• The Wash Sale Rules - The Real Spin - CBIZ

  www.cbiz.com/page.asp?pid=9258

  The tax rules prohibiting losses on a wash sale have been a part of the Internal Revenue Code since 1921. There has been little statutory change in this important ...

• Income tax in the United States - Wikipedia, the free encyclopedia

  en.wikipedia.org/wiki/Income_tax_in_the_United_States

  In the United States, a tax is imposed on income by the federal, most state, and many local, governments. The income tax is determined by applying a tax rate, which ...

• Wash Sales 101 - Fairmark.com

  www.fairmark.com/capgain/wash/ws101.htm

  When the value of your stock goes down you get that sinking feeling you've lost money. But the tax law doesn't allow that loss until you sell the stock.

• Securities and Exchange Commission Forms List

  www.sec.gov/about/forms/secforms.htm

  Securities and Exchange Commission Forms List. This page provides links to PDF versions of SEC public forms and many of the rules, regulations, and schedules ...

• 17 CFR 230.501 - Definitions and terms used in Regulation D ...

  www.law.cornell.edu CFR Title 17 Chapter II Part 230

  There are 3 Updates appearing in the Federal Register for 17 CFR 230. Select the tab below to view, or View eCFR (GPOAccess)

• Risks of Investing in Bonds

  www.investinginbonds.com/learnmore.asp?catid=3&id=383

  Risks of Investing in Bonds. All investments offer a balance between risk and potential return. The risk is the chance that you will lose some or all the money you ...

• Welcome to the Cost Basis Reporting Resource Center!

  costbasisreporting.com

  The Cost Basis Resource Center is your source for cost basis reporting information and solutions.

• Yard Sales : The Prowers Journal

  theprowersjournal.com/yard-sales

  Yard Sales Yard Sales Get your Yard Sale listed for only $5.00. Stop by Robinson Printing and fill out one of our handy little Yard Sale forms (See Below).

• Ted Cruz Wants To Eliminate The IRS; Democrats Balk : The Last ...

  lastresistance.com/2232/ted-cruz-wants-to-eliminate-the-irs...

  James Bovard said: The more expansive government is, the more perils people face in daily lives, be it from IRS agents or from other agencies that often have ...

• Latest News Headlines - NASDAQ.com - NASDAQ Stock Market - Stock ...

  www.nasdaq.com/news

  Find all the latest news headlines in the stock market today features general financial news, forex news, options news, and more.

Related Posts

You're reading an article about IRS Rules on the Sale of a Stock and Reinvestment in Similar Investment and you can find articles IRS Rules on the Sale of a Stock and Reinvestment in Similar Investment this is url https://irstaxatttorney.blogspot.com/2014/01/irs-rules-on-sale-of-stock-and.html,you may spread or copy and paste it if the article IRS Rules on the Sale of a Stock and Reinvestment in Similar Investment This is very beneficial to your friends, but do not forget to put the link IRS Rules on the Sale of a Stock and Reinvestment in Similar Investment as the source.