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In the Tax Strategies FAQ (, Roy Lewis says:

One final note: while the wash sale provisions work on shares that you sell for a loss, there are no corresponding provisions for stock that you sell at a gain and then immediately repurchase. So, while wash sale losses can't be claimed, gains can't be avoided. That is, if you sell stock for a gain and buy it right back, you must still report the gain -- no special gain deferral rule applies.

If that is so, then what is this I read about rollover of capital gains on p58 of IRS Publication 550? There is a section that describes how to delay paying capital gains tax on the profit from the sale of a publicly traded security by buying a replacement property within 60 days of the sale, and declaring a basis change according to a specific formula.

This seems to me to be direct contribution of the Foolish statement above. What am I missing? Why can't I sell on the peaks, buy on the valleys, and then delay the final sale until sometime later to get the lower capital gains tax?

Granted, I know the risks of this kind of market timing as an investment strategy, but every once in a while, I want to protect against a big fall with certain stocks, and it seems like this would let me do it without penalty.

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