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Subject:  "Wash Out" Questions.... Date:  8/31/1999  8:38 AM
Author:  JackBNimble Number:  13550 of 88033

I hope some of you kind folks can help me out as you have several times in the past.

I'm trying to make sure I'm clear on the wash out rules for trading stocks. My primitive understanding of the subject goes something like this:

A person buys 100 shares of xyz corp for say, $20. After holding it for a couple of months the price is now $14 and he sells in order to take the capital loss. Now as I unsderstand it, one cannot take the loss if the stock is repurchased within 30 days. Someone recently told me the waiting period was 60 days, so I'm not even sure which is correct here. But whatever the correct time is, if we put that aside for a moment, and assume that requirement has been met, then one should be able to repurchase the stock and still take the loss on the original shares. Is this correct?

Now for another more complicated scenario. The same 100 shares of stock is purchased for $20 and just two weeks later it's been beaten down to $14. Rather than selling, one purchases an additional 100 shares of stock at $14 to lower the cost basis. After holding the original 100 shares for 30 days (or whatever the correct time period is), can these then be sold to take the loss on the original shares based the "first in, first out" (FIFO) method of accounting? Is this correct, or must there also be a thirty day wait between the 1st and 2nd purchase? Must the second lot of stock purchased also be held for some minimum amount of time as well before selling the first?

As you can see, I'm not very clear on this subject so any clarification would be most appreciated!

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