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<<So the key is to not let any wash sales bridge two tax years. If you can avoid that, the wash sale rules actually become moot.>>

Correct.

<<What if the sale bridges two tax years?>>

Then you have a wash sale, and the wash sale rules apply. Your loss is not allowed in the year of sale, and you adjust the basis in your repurchased shares. Just as I point out in my article in the Taxes FAQ area.

<<Say, I buy 10 shares of ABC at $150 in October, then Sell 10 Shares of ABC December 20th at $50. They report stellar earnings and I am a believer, so I buy 10 shares of ABC at $51 and watch it fall to $40 mid January when I finally sell for good.>>

Your December 20th sale would not be recognized for tax purposes. When you finally make the January sale, you'll recognize both your initial and repurchased loss. Again, it's all explained in the Taxes FAQ article. Check it out.

TMF Taxes
Roy

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