Wash Sale is a sale of a security (
stock,
bonds,
options) at a loss and repurchase of the same or substantially identical stock 30 days before or after the sale, for which the
capital loss is disallowed for
tax deduction. Since the taxpayer is in the same economic position before and after the sale, the loss is not recognized for tax purposes. The disallowed loss is added to the
basis of the newly acquired security.
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Used in the context of general equities. Purchase and sale of a
security either simultaneously or within a short period of time, often done with the intention of recognizing a tax loss without altering one's
position. See:
tax selling.
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