The Capital Gains Blog

Question: Wash sale for capital gains when paired with Capital Loss?

Hi:

I understand that the IRS Wash Sale rule applies to capital losses only, not to capital gains. That is, there are no tax consequences if I buy back a stock that I just sold at a gain; I pay Capital Gains Tax as usual.

However, I am not clear on this scenario:

1. I sell stock A for a capital loss of $1000,
2. On the same day, I sell stock B at a capital gain of $1000,
3. Now, my $1000 loss and $1000 gain cancel each other, and I don’t have any tax liability for the year on these transaction. Right?
4. I believe that stock B is a long term holder. So I buy it back.

The question is, does this still allow me to use my $1000 loss on stock A to cancel my $1000 gain on stock B?

Answer: The wash sale rule only applies to substantially equal securities (like the same exact stock, ETF, mutual fund, etc.). It does not apply to different stocks. So immediately buying back stock B after a gain on B has nothing to do with when you sold stock A at a loss, other than the gain on B offset by the loss on A on different lines of your Schedule D at the end of the year..

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