What is the sale for washing?

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Wash sales concept includes the sale of some type of security with a loss. This event would occur at the end of the current tax year. At the same time, this process will include the purchase of the same or very similar stocks in a very short period of time. It is designed as a means of creating a capital loss that can be required from the tax return for a covered period, the idea is to compensate for total capital profits for the tax year, while still maintaining security in the investment portfolio for future use.

Over time, some steps have been carried out to check the sales process. For example, there are now the provisions of tax codes in the United States and the UK, which forbids the sale of Wash, if shares, bonds or the possibility are purchased within thirty calendar days of sale. This applies, although the time between sale and return purchase occurs at the end and at the beginning of two tax years. When the sales of washing is forbidden, the amount of the lines is added to the capsD for the purchased acquisition, which is an approach that definitely serves as an effective discouraging means.

In some countries around the world, Wash sales transaction is not only carefully monitored, but also considered illegal. In the case, the brokers will not participate in Wash sales transaction, although this includes international security. In general, the sale for washing will be considered illegal if it is clear that the only reason for the event is to avoid paying taxes from the awarding by generated shares or bonds that are sold with loss and then purchased.

The investor may decide to use the sale of Wash to solve marginative stocks that have not made expectations, but are expected to improve in the upcoming calendar year. The broker organizes the sale with a loss, then also ensures the back purchase in the specified time. In all cases the broker will work within the districts of the federal reserveEM or the highest level of income and tax office in jurisdiction.