7951 / How is a wash sale of mutual fund shares taxed?

However, when the double category method is used for determining basis and holding period, a wash sale of mutual fund shares from the “one year or less” category after acquisition of the replacement shares will result in the aggregate basis of the shares remaining in the “one year or less” category being increased by the amount of the loss that is disallowed.¹ When the single category method is used for determining basis, or when an average basis method is not used, the general wash sale tax basis rules apply.²

1.  Treas. Reg. § 1.1012-1(e)(3)(iii)(d); IRC § 1091(d).

2.  Treas. Reg. § 1.1012-1(e)(4)(iv).