™Stock Market University · Research, Taxes & Investor Operations
What Is a Wash Sale?
Understand the idea. See the connections.
Understand when a loss sale and a substantially identical replacement can trigger the U.S. wash-sale rule.
The idea to understand
Identify the loss sale, substantially identical replacement and 61-day window that can trigger the U.S. wash-sale rule.
The explanation
The essentials, explained.
Follow the idea, then work through an example. Pause at the self-check whenever you are ready.
The rule in plain English
A wash sale can occur when stock or securities are sold at a loss and substantially identical stock or securities are bought—or acquired through a contract or option—within 30 days before or 30 days after the sale. The sale date is part of the full 61-day window.
The loss is usually deferred
In a taxable account, the disallowed loss is generally added to the basis of the replacement shares. That adjustment usually postpones recognition rather than making the economics of the loss disappear.
Substantially identical matters
The rule does not apply merely because two investments are related, and it cannot always be avoided by changing a ticker. Facts such as the issuer, rights, convertibility, fund exposure and contract terms can matter.
Start with the records
Track acquisition dates, sale dates, share lots, adjusted basis and every account that may hold a replacement. Brokerage reporting can help, but a taxpayer remains responsible for a complete return.
Optional context & practice
Why this matters
A recognized investment loss can receive different tax treatment when substantially identical replacement activity occurs in the relevant window.
Useful vocabulary
Wash sale: A U.S. tax rule that can disallow a current loss when substantially identical stock or securities are acquired within the specified window. Substantially identical: A facts-and-circumstances standard used in the wash-sale rule; related investments are not automatically identical, and a different ticker is not automatically sufficient. Replacement shares: Shares acquired that are evaluated as potential replacements in a wash-sale analysis, subject to timing and substantially-identical requirements.
Tax recognition and economic loss are separate
The ordinary taxable-account rule can move a loss into matched replacement basis; it does not restore lost cash. An IRA acquisition can instead disallow a loss without preserving it in IRA basis. Acquisitions before the sale, automatic purchases and relevant other accounts must be checked. A single sale-and-purchase example cannot settle a chain of multiple lots or repeated replacements.
Try it with a hypothetical example
Read IRS Publication 550’s wash-sale section and identify a loss sale, relevant replacement acquisition and the records needed to evaluate both.
A question to think through
An investor loses $1,000 and receives a $1,000 replacement-basis adjustment. Has the investment economically broken even?
Compare your reasoning
No. The basis adjustment changes tax recognition, not the economic cash loss. The later disposal and any further replacements still matter.
A moment to reflect · optional
How long is the standard window around the loss sale?
Think through your answer, then compare it with the explanation.
Reveal the explanation
Thirty days before, the sale date, and thirty days after—a 61-day window.
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Sources & editorial notes
Reviewed 2026-10-13 · My Market Book editorial team. Examples are hypothetical unless identified as historical. General education, not a personal investment recommendation. Next scheduled review: 2026-11-12, or earlier after a material change. Rule and product sensitive.