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You're probably referring to the "wash sale" rules. If you sell a stock at a loss and then buy it back in the same company within 30 days, you can't claim the capital loss on the stock you sold. Instead, the loss is added to the basis of the new stock you bought and is used in the calculation of the gain or loss the next time you sell that stock.

There's no such restriction when you have a gain on a sale. Which is a good thing. Case in point: I had bought into Yahoo last February at a split-adjusted $37 per share. When the market tanked early in September, I panicked and sold my entire position in Yahoo for around $78 (after it had dropped from around $120). But then it turned around almost immediately and I got back in within two weeks and bought back almost all the shares I had sold, this time for around $85. Had I not known this rule and waited for 30 days to get back in, I would have had to pay around $130. And the rest, as they say, is history.

And for those of you who are un-Foolish enough to have brokers churning your portfolios for you, you have to watch them. Before I became a Fool and took over my own portfolio (in fact, the very reason I fired the broker and took it over myself!) was that he kept buying high and selling low, and then getting right back in and buying high again in the same stocks. He was completely unaware of the wash sale rules and how much havoc he was causing me on that year's tax return, not to mention the return on my investment!!!!

Tax Attorney

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