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A wash-sale involves the sale of a security within 30 days of purchasing a "substantially identical" one.
Selling a security at a loss often provides a tax deduction, either increasing your tax refund or reducing your tax bill. However, the IRS disallows this deduction if you, your spouse or your business purchases a "substantially identical" security within 30 days. This wash-sale rule prevents tax deductions associated with "ineffective" sales.
Related Links
SEC article on wash sales
Investopedia article on the wash-sale rule
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