Wash Sales

When you buy and sell the same security at the same time or within a short period of time, you engage in what is known as a "wash sale." Wash sales violate the federal securities laws—Section 9(a)(1)(A) and Rule 10b-5 of the Securities Exchange Act of 1934—if they are done to create the false or misleading appearance of active trading in a security.

Under Internal Revenue Service rules, you may be prevented from recognizing a loss on your tax return if you purchased a security within 30 days before or after the date you sold the "substantially identical" security. For more information about wash sales, read IRS Publication 550, Investment Income and Expenses (Including Capital Gains and Losses).