A "Wash Sale" is trading activity in which shares of a security are sold at a loss and a substantially identical security is purchased within a 61-day window that extends from 30 days before the date of the sale to 30 days after the date of the sale. The portion of the loss associated with the wash sale is then deferred and cannot be immediately recognized.

A definition of Wash Sales and some examples are available in IRS Publication 550 Investment Income and Expenses (Including Capital Gains and Losses).

On page 71 (Glossary): Wash sale: A sale of stock or securities at a loss within 30 days before or after you buy or acquire in a fully taxable trade, or acquire a contract or option to buy, substantially identical stock or securities.

On page 56: Wash Sales

You cannot deduct losses from sales or trades of stock or securities in a wash sale unless the loss was incurred in the ordinary course of your business as a dealer in stock or securities.

A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:

1. Buy substantially identical stock or securities,
2. Acquire substantially identical stock or securities in a fully taxable trade,
3. Acquire a contract or option to buy substantially identical stock or securities, or
4. Acquire substantially identical stock for your individual retirement arrangement (IRA) or Roth IRA.

If you sell stock and your spouse or a corporation you control buys substantially identical stock, you also have a wash sale.

If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities (except in (4) above). The result is your basis in the new stock or securities. This adjustment postpones the loss deduction until the disposition of the new stock or securities. Your holding period for the new stock or securities includes the holding period of the stock or securities sold.

To enter a wash sale in the TaxAct^® program:

1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
2. Click Investment Income in the Federal Quick Q&A Topics menu to expand, click Gain or loss on the sale of investments to expand, then click Capital gain or loss (Form 1099-B).
3. Click + Add Form 1099-B to create a new copy of the form or click Edit to review a form already created.
4. Click Quick Entry to scroll down to answer all applicable questions or click Step-by-Step Guidance to proceed with the program interview questions.
5. After entering the investment property details, continue to the screen titled Investment Sales - Adjustment Code(s).
6. Enter the Wash sale loss disallowed amount, then click Continue.

Related Links

• Capital Gains Tax
• Cost Basis
• How to Import Stock Information Using a CSV File from Your Broker
• Schedule D - Capital Gains and Losses

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.