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As of january 1, 2002 I have 3000 shares of xyz corp. I purchase an additional 1500 xyz shares on Dec. 2, 2002. Not thinking, I sell 1500 xyz corp. an Dec. 30 for a $5000.00 loss. I think 'wash sale rule' is in effect because 1500 shares bought on Dec. 2 are considered replacement shares to the 1500 xyz shares sold on Dec. 30.

Yes, that's a wash sale, and the $5,000 loss realized on Dec 30 is disallowed. (But only temporarily. You're gonna add that to the basis of the newly purchased shares, so you will get to take the loss eventually.)

Now if I sell another 1500 xyz shares on Dec. 31, 2002 for the approximate same $5000.00 LOSS can I Now take THIS loss off my 2002 tax return?

Yes, now you're ok. You can take all of this loss, since the purchase on Dec 2 has already been taken care of with the Dec 30 sale.

But note: if you are actually doing these things - that is, generating wash sales willy-nilly and then asking about them after the fact - you really do need to download Pub 550, Investment Income and Expenses, and read about wash sales and how they're treated.

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