The Wash Sale

As was indicated in item #10, the duration of stock ownership has decreased as a result of the internet and artificial intelligence. Therefore, it is usual for shareholders to receive a news report that sharply increases or decreases the value of relatively recently purchased shares and then decide to sell in order to profit or avoid losing money. When a sale is started without allowing enough time for the initial purchase to be fully processed, it is referred to as a "wash sale."

Shareholders who pay taxes ought to be particularly aware of one aspect of wash sales. In most cases, a shareholder's sale of shares at a loss reduces net income, which lowers the amount of taxes owed. With wash sales at a loss, that is not the case. Brokerages won't remove the sum from your yearly earnings. However, wash sale gains will still be subject to tax.