Hello,
I was hoping someone could answer a trading question about the Wash Sale Rule:
I have $1,972.02 in losses for 2015. It's my contention the Rule's intent was to prevent the creation of artificial losses to reduce taxable gains.
Should the Rule be applied when there are no taxable gains and no tax withholdings from my VA Pension or any other income or assets?
I put the long version of this question on my site: https://sway.com/oqsUzAvo0t-oEGsW
Thanks!
Update:cynic 47- We're making progress, but let's take it one step further. If the Rule's intent is to prevent one from deducting a loss, then the assumption is there are taxable gains, but if there are no taxable gains from which to claim a loss, then one cannot claim a loss. If this is correct then what is the Rule's intent if there are no taxable gains from which to claim a loss?
Answers & Comments
Verified answer
No, the law is not vague. The only "disagreement" is that some people get it right and some get it wrong. If you sell a security at a loss, you cannot deduct the loss if you purchase the same security within 30 days before or after the sale. See page 59 of IRS Publication 550.
You will get nowhere with an argument based on "intent" and "assumption." You can, in fact, deduct capital losses even when there are no capital gains (up to $3,000 against ordinary income, with carryover to next year for excess losses). Thus, the Wash Sale Rule's application (forget "intent") is the same, whether or not there are current capital gains.
Bostonian's comment is spot on. You have the right to present your argument in Tax Court, but you'll lose.
Feel free to sue in Tax Court when the IRS forces the wash sale rule. You will lose, but it's your right.
Your contentions are irrelevant. The tax code is what matters. Just hold off repurchasing stock sold at a loss for 31 days and you have no problem.