Today TaxMama hears from Kay in New Jersey, who has done some thinking. “I am an investor in the stock market. How can I avoid a wash sale? For example I own 100 shares of stock A and want to sell it to help offset my capital gains for 2009. However I do not want to wait 30 days to buy that same stock. Any advise on how to avoid the wash sale problem?”
First of all, let’s explain wash sales to folks: When you sell a stock and buy it back within 30 days before or after the sale, IRS rules treat that, essentially, as if you had never sold the stock at all. You just adjust the basis for costs.
So, Kay, you can’t avoid that trap, at least not legally. Or at least, not in the same account.
I suppose you could sell the stock in one brokerage account and buy it in another. But I don’t think you can do that either.
Of course, you could consider selling it in your brokerage account and buying it back in your IRA. But…that’s been outlawed too, in recent rulings. So, I can’t see any way to avoid it except to wait at least 31 days to replace the stock. For more advice, talk to your broker, or a tax expert on investments.
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- IRS Publication 550, Chapter 4 :: Explanation of Wash Sales