When investors have unrealized losses on trades, they may engage in tax-loss selling near the end of the year. Before doing so, it is important to understand the tax wash-sale rule, which is part of Internal Revenue Service code. If you sell a stock for a loss, and then rebuy the same (or similar) stock within 30 days, the wash-sale rule applies. This means that, in most cases (consult with your accountant or tax attorney for exceptions), you can’t deduct losses on the sales that preceded the repurchase.
*This definition is not tax advice. Consult with your accounting or tax attorney for more information.