Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 1
"This means that the wash sale rules are activated when you buy, AND THEN BUY within the time window."


You don't have a wash sale without a sale. You don't have a wash sale when you enter into a short option position when you have a long stock position. These are not substantially identical --- they basically move inversely --- and there's no sale. You don't have a wash sale when you close out a covered call by delivering the appreciated stock, and you don't have a wash sale when you sell your hedged position and your hedge together. You're closing out your gain position. And you're closing out all your positions, at a net gain.

The reference in Pub 550 is to selling a stock at a loss and buying a call as a stock replacement trade. Basically, they don't want you claiming the tax loss on a loss position when you haven't fully exited your long exposure. In this situation the only long exposure is a gain position. No wash sale problem.
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.