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If someone owns 100 shares of DEF and then buys another 100 shares and within 30 days of that purchase sells 100 shares, he cannot apply the sale to the more recent purchase as a loss. Does that make more sense?

Well, actually he can sell those specific shares and create a loss, but it's a wash sale, so the loss is added on to the basis of the shares he still owns.

I think the easiest way to think about it is that if 31 days after a sale for a loss you don't own any substantially identical stock, the wash sale rule is moot. IOW, when you totally liquidate a position and stay out for 30 days, everything that's been deferred gets recognized and the books balance.

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