Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Income — Capital Gain or Loss Workout

Holding Period

Case Study 1: Wash Sales

The taxpayer buys 100 shares of X stock for $1,000. The taxpayer sells these shares for $750 and within 30 days from the sale buys 100 shares of the same stock for $800. Because the taxpayer bought substantially identical stock, the taxpayer cannot deduct the loss of $250 on the sale. However, the taxpayer adds the disallowed loss of $250 to the cost of the new stock, $800, to obtain the basis in the new stock, which is $1,050.

The wash sale is reported in Box 1g of Form 1099-B.
Note: Wash sales are in scope only if reported on Form 1099-B or on a brokerage or mutual fund statement.

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