Hello! I have a quick question for those familiar with the wash sale rule. I understand what it is, basically, if you sell shares of XYZ at a loss and buy it again within 30 days, you can't claim those losses on your taxes for the filing year. That part I understand. My question: Let's say I buy 100 shares of XYZ at $2 ($200) and it drops down to $1. At this point, my PL is -$100. However, let's say I buy 100 additional shares at $1, and then sell 100 shares (while still holding on to the initial 100 shares) at $1.50 (gaining $50 for that trade). Would the wash sale rule kick in if I did this example, say, 3-4 times and never sell the original 100 I had before? This could very well be a very stupid question, I'm just trying to make sure I understand the rule correctly.
If you designate your positions and they result in capital gains, the IRS has no problem with you. If you realize a loss and within 30 days means before or after realizing that loss you buy substantially identical shares, you have a wash sale. Then, the cost basis of the replacement shares must be adjusted by the loss and you will not get to claim the loss until the replacement shares are disposed of without a subsequent 30 day wash sale violation.