Replies to post #49364 on APT MotoVox Group Inc. (MTVX)

[bsdvs23]

Wash Sale is a double transaction on "substantially similar" securities in a 61-day window. The 61 days includes the date of the trade plus 30 days before and 30 days after. This means that if you hold a stock, buy additional shares and sell it for a loss within 30 days of the replacement purchase, or you sell stock you own at a loss and then repurchase it within 30 days of the sale loss, your trade is considered a wash sale.

A key part of the definition of a wash sale is the phrase "substantially similar", so it's important to understand what that means. Whenever you're selling and repurchasing shares of stock in the same company, such as XYZ in the example above, those shares are considered "substantially similar" and will be subject to the wash sale rule. In general, shares of stock in two different companies are not considered substantially similar.


Examples of Wash Sale Rules

Example# 1 - Not a wash sale
1/4/2010 buy 100 shares of XYZ for $1,000.00
1/5/2010 sell 100 shares of XYZ for $900.00
Example#1 is not a wash sale because the purchase on 1/4/2010 is the original purchase and a loss cannot be disallowed and added back to the original shares. In addition, the original buy was completely sold and in this example there were no replacement shares purchased within the 61-day wash sale window.

Example#2 - Not a wash sale
3/6/2010 buy 100 shares of XYZ for $1,000.00
3/7/2010 sell 50 shares of XYZ for $450.00
Although 50 shares remain outstanding, it is not a wash sale because the purchase on 3/6/2010 is the original purchase and a loss cannot be disallowed and added back to the original shares.

Example#3 - Wash sale
5/10/2010 buy 50 shares of XYZ for $500.00
5/10/2010 buy 50 shares of XYZ for $500.00
5/11/2010 sell 50 shares of XYZ for $450.00
Example#3 is a wash sale because it met both requirements for the wash sale to occur: the stock was sold at a loss and the shares were repurchased within the 61-day wash sale window. The sale on 5/11/2010 was for a loss, and since there were two separate buys on 5/10/2010, the loss would be disallowed and added to the remaining 50 shares.

B!