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Phooley and Charlie48K, thanks for setting me straight. Now you know why I'm not a tax accountant!

I knew the wash sale rule applies to losses, my mistake was assuming it also applies to determining long term vs short term capital gains. (Everyone knows what happens when you assume something).

Charlie48K, your answer did raise another question which I need to research:
Second, the holding rule for your plan is not just one year from exercise of the stock, but also two years from the date of the option grant to become a long term gain. Have you been meeting the two year rule?

I don't know what the 'date of option grant' is for my purchases/sales, but I'll check it out. The company accumulates our contributions as payroll deductions through the quarter then purchases stock on the first day of the following quarter.

On the positive side, I have been reporting the 15% company discount as ordinary income (even thought it isn't reported on our W-2's, or anywhere else that I know about … that's always raised questions in my mind).

Once again Thanks for the replies!
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