February 3, 2010 2 Comments
Consider the following simple example: An investor purchases 100 shares of stock on Jan 3, 2011, then another 100 shares of the same stock on Jan 18, 2011. On Jan 31, 2011, the investor sells the shares acquired on Jan 18 (via specific identification) at a loss. Do the shares acquired on Jan 3 constitute replacement shares thereby disallowing the loss?
Silver’s position (as shared by Kaye Thomas of Fairmark Press on page 6 of his comments in response to IRS Notice 2009-17 and again in his comments in response to the proposed regulations, here) is that this sequence of activity does not constitute a wash sale since the Jan 3 shares were acquired before the Jan 18 acquisition date of the shares sold on Jan 31 and therefore cannot be considered replacement shares. More generally, shares acquired before the acquisition of shares sold should be disregarded when applying the wash sale rule.