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If you are regularly buying stock through your employer provided stock purchase plan (or even a DRP), say, every quarter (on 1/1, 3/1, 6/1 and 9/1) to thetune of say 5% of your pay check.

Is it critical that you time the sale of stock in same company to be 30 calendar days prior to the purchase plan's buy date to avoid falling under the wash sale rule for buying back into a company you sold at a loss?

Supposing the answers is "YES you need to be careful about the timing of your transactions" then here's a hypothetical:-
1. Let the current beginning of quarter (1/1/01) stock purchase plan transaction be $1000 worth of stock.
2.Let the current sell at loss transaction be $10,000 current market value stock sold with a cost basis of $15,000. (realized loss of $5,000)
Variable here is the date of this sell transaction.
3. Let the subsequent quarter's (3/1/01) stock purchase plan transaction be $1000 worth of stock.

a) Is the timing of Transaction #2 above required to fall within {1/1/o1} and {(3/1/01)-30cal days} to avoid disqualifying the $5000 as a legitimate tax loss?

b) Is all(100% of) the $5000 loss-on-transaction#2 discounted or maybe only prorated (1000/10000=10% or 1000/15000=6.6%) based upon the size ($1000) of the buy back on 3/1/01.

much obliged!


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