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Techniques that you
may use to avoid the loss limits imposed by the wash sale rules.
1.
Wait at least 31 days before purchasing substantially
identical stock or securities. The
risk inherent in using this technique is that you lose out on any gain on
the stock that may occur during the waiting period.
2.
“Double
up,” that is, buy a second lot that is equal to the original holding, wait
31 days, and then sell the original lot, thereby recognizing the loss.
This allows you to maintain a continuing interest in the stock.
However, you have to tie up additional funds for at least 31 days to
accomplish your goal and you double the downside risk.
3.
Sell the loss stock and reinvest in the stock of another company in
the same industry that has historically performed the same way as the loss
stock. After 31 days, you can
reverse the process to restore your original holding.
This method minimizes your risk during the waiting period and you do
not violate the wash sale rule because the stocks of two different companies
are not considered to be substantially identical.
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