Tax Facts

7537 / How is the sale or disposition of stock or securities in a wash sale taxed?

No special tax rules apply if an investor realizes a gain in a wash sale of stock or other securities; rather, the sale will be taxed under the rules peculiar to both the type of disposition and to the particular stock or security sold. For the taxation of gain on treasury bills, bonds and notes, and municipal bonds, see respectively Q 7626, Q 7632, and Q 7663. For taxation of gain on corporate obligations, see Q 7628 and Q 7635. For taxation of stock, see Q 7517 to Q 7522.


On the other hand, to the extent that shares of stock or securities sold are replaced in a wash sale (as defined in Q 7536), any loss realized on the stock or securities sold may not be recognized for income tax purposes and, therefore, may not be used to offset capital gains or otherwise deducted. However, if the quantity of the stock or securities sold at a loss exceeds the quantity replaced, the loss realized on the excess shares or securities may be recognized as a capital loss for income tax purposes.1





1.   IRC § 1091(b); Treas. Reg. § 1.1091-1(c); Rev. Rul. 70-231, 1970-1 CB 171.


Tax Facts Premium Tools
Calculators
100+ calculators specifically designed to help you easily assist clients with specific planning situations and calculations.
Practice Guidance
Designed to help you discover new ways for which to build and maintain client relationships.
Concepts Illustrated
Specifically designed to help you easily assist clients with specific planning situations and calculations.
Tax Facts Archives
Access to the entire library of Tax Facts dating back to 2012 allowing you to look up the exact tax figures from prior years.