Wash and rinse stock market

Wash and rinse stock market

By: BestWebLinks Date: 12.07.2017

An Internal Revenue Service IRS rule that prohibits a taxpayer from claiming a loss on the sale or trade of a security in a wash sale.

wash and rinse stock market

A wash sale also results if an individual sells a security, and the spouse or a company controlled by the individual buys a substantially equivalent security. Stocks or securities of one company are generally not considered substantially identical by the IRS to those of another. However, there may be circumstances in which preferred stock, for example, may be considered substantially identical to the common stock.

wash and rinse stock market

This would be the case if the preferred stock is convertible into common stock without any restriction, has the same voting rights as the common stock, and trades at a price close to the conversion ratio. If the loss is disallowed by the IRS because of the wash sale rule, the taxpayer has to add the loss to the cost wash and rinse stock market the new stock, which becomes the cost basis for the new stock. Dictionary Term Of The Day.

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wash and rinse stock market

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