Question

Q: Miles sold 100 shares of Wescon stock at a loss on October 14, 2016. To avoid being subject to the wash sale rules, on of the following dates could he have purchased the stock?

A- September 1, 2017
B- September 15, 2017
C-November 2, 2017
D- November 10, 2017

Answer 1

All the options would be correct if the sales is made on October 14, 2016.Therefore to select a single option the solution has been provided below considering that the sales is made on October 14, 2017.

Solution :

The answer is A - September 1, 2017

According to the publication 550 "Investment income and expense" of Internal Revenue Service:

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 account (IRA) or Roth IRA.

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.

In this question the shares were sold on October 14, 2017 . So the wash sale period includes October 14 , 2017 and within 30 days before the sale that is from 14 September 2017 and within 30 days after the sale that is upto 13 Nov 2017.So to avoid being subject to wash sale rules, he should avoid purchase between 14 September 2017 to 13 November 2017.

The options B, C and D are between 14 September 2017 to 13 November 2017.So if Miles purchases the stock on any date which is given in option B, C and D then miles will be subject to wash sale and loss cannot be deducted.

Therefore the option A is correct because option A is not in between 14 September 2017 and 13 November 2017.