Series 7 practice questioneasyTax Implications — Wash Sale Rule
The wash sale rule prevents an investor from claiming a loss if substantially identical securities are repurchased within:
- A15 days before or after the sale
- B60 days before or after the sale
- C30 days before or after the sale✓ Correct answer
- D90 days before or after the sale
Explanation
Why C — 30 days before or after the sale
The wash sale rule (IRC Section 1091) disallows a capital loss deduction if the investor purchases substantially identical securities within 30 days before or after the sale at a loss. The 61-day window (30 days before + sale day + 30 days after) is designed to prevent investors from selling solely to realize a tax loss while maintaining their position in the same security.
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