Taxes: The wash-sale rule & IRAs

June 6, 2008

The IRS frowns on taxpayers who dump a losing investment to take a write-off, then turn around and repurchase it on the hope that it will reverse its fortunes.

The IRS frowns on taxpayers who dump a losing investment to take a write-off, then turn around and repurchase it on the hope that it will reverse its fortunes. The "wash-sale rule," as it's known, disallows a deduction if the security is purchased 30 days prior to or 30 days after the sale. That didn't stop one taxpayer, however, from unloading a stock from his individual investment account and using his tax-deferred IRA to repurchase it. No go, the IRS said in a recent decision. It shot down the deduction.