Understand the Wash Sale Rule While this is not a trading strategy, it is an important rule you need to bear in mind when enacting your strategies. When you sell and realize a loss, you want to ensure that you understand the wash sale rule so that you do not create a situation where you need to defer that loss. The IRS created the wash sales rule to prevent taxpayers from realizing "artificial" losses for tax purposes and then buying back into the same security. You cannot deduct losses from securities if you re-purchase that security either 30 days before or after you sell it for a loss. If you do repurchase the security within the 61-day window, the loss is deferred and added to the cost basis of the new lot. This is a confusing and complex rule. To manually monitor and adjust for wash sales is extremely difficult .
I don't fully understand it myself , so now that i know about it , i try to avoid this stituation altogether .
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I don't think it matters , you still bought into the same security , so according to that rule , you can't claim the loss on the original purchase , at least that's what i get out of it .
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