Further Understanding of Wash Sale Rules
Disallowed losses due to the wash sale rule are added to the basis of the repurchased shares.  In your example, on day two you paid $0.70 per share. Then the disallowed $0.30 loss from the previous day gets added to the basis, making your total basis $1.00 per share. When you sell at the end of the day for $1.00 per share, your net gain/loss is zero. Furthermore, you can recapture disallowed losses by selling the last lot of ABC, completely divesting yourself of all holdings in ABC for at least 31 days. Even if that last lot was a loss, when taking into account the increased basis from previously disallowed wash sale losses, you can claim the loss fully on this last, non-wash sale. Once you own no shares for 31 days, it's game over. Even though the accounting has wash sales to consider, in the end, gains and losses all cancel to one net position of break even, gain or loss.  It's when there are shares remaining at the end of a period of time that the wash sale rules really impact the numbers.
Are there any other losses that can be expected beyond the above? The lender may have to invest some money into the house in order to get it in shape to sell. Also, while the lender possesses the house they are liable to the property taxes and possibly utilities. are there any statutes or pressures to motivate the financial institution to get fair price when the property is sold? The lender is motivated to at least break even when selling the property in order to limit losses on their investment. This means they are very motivated to seek a higher price, but they're also motivated to sell the property quickly in order to limit their losses due to property taxes. Usually the lender takes a loss of the investment if foreclosure occurs; only 10 percent to 20 percent  of auctioned foreclosed houses did yield a surplus. When the lender sells the foreclosed property using a realtor, they're motivated to sell it as quickly as possible so long as they break even. In this case there is little motivation to sell the property for a surplus. If the property is being sold via auction, then time is not a factor and the lender will just sell to the highest bidder. "There are different schools of thought. You can ask the IRS - and it would not surprise me if you got different answers on different phone calls. One interpretation is that a put is not ""substantially identical"" to the disposed stock, therefore no wash is triggered by that sale. However if that put is exercised, then you automatically purchase the security, and that is identical. As to whether the IRS (or your brokerage firm) recognizes the identical security when it falls out of an option, I can't say; but technically they could enforce it because the rule is based on 30 days and a ""substantially identical"" stock or security. In this interpretation (your investor) would probably at least want to stay out of the money in choosing a strike price, to avoid exercise; however, options are normally either held or sold, rather than be exercised, until at or very close to the expiration date (because time value is left on the table otherwise). So the key driver in this interpretation would be expiration date, which should be at least 31 days out from the stock sale; and it would be prudent to sell an out of the money put as well, in order to avoid the wash sale trigger. However there is also a more unfavorable opinion - see fairmark.com/capgain/wash/wsoption.htm where they hold that a ""deep in the money"" option is an immediate trigger (regardless of exercise). This article is sage, in that they say that the Treasury (IRS) may interpret an option transaction as a wash if it's ballpark to being exercisable. And, if the IRS throws paper, it always beats each of paper, rock and scissors :( A Schwab article (""A Primer on Wash Sales"") says, if the CUSIPs match, bang, wash. This is the one that they may interpret unfavorably on in any case, supporting Schwab's ""play it safe"" position: ""3. Acquire a contract or option to buy substantially identical stock or securities..."" . This certainly nails buying a call. As to selling a put, well, it is at least conceivable that an IRS official would call that a contract to buy! SO it's simply not a slam dunk; there are varying opinions that you might describe as ranging from ""hell no"" to ""only if blatant."" If you can get an ""official"" predetermination, or you like to go aggressive in your tax strategy, there's that; they may act adversely, so Caveat Taxfiler!" It has already lost twice, to the lower courts and the appellate court. It says that the manufacturer could not allow you to resell things you legitimately own, or that they can even ask for a cut of the proceeds. Legally, you would not even be allowed to have a garage sale if anything you were selling were manufactured overseas. An unintended consequence is that it would give manufacturers an incentive to move facilities overseas so they can control the secondary market. @BlackJack does a good answer of addressing the gains and when you are taxed on them and at what kind of rate. Money held in a brokerage account will usually be in a money-market fund, so you would own taxes on the interest it earned.   There is one important consideration that must be understood for capitol Losses.  This is called the Wash Sale Rule.  This rule comes into affect if you sell a stock at a LOSS, and buy shares of the same stock within 30 days (before or after) the sale.  A common tactic used to minimize taxes paid is to 'capture losses' when they occur, since these can be used to offset gains and lower your taxes.  This is normally done by selling a stock in which you have a LOSS, and then either buying another similar stock, or waiting and buying back the stock you sold.   However, if you are intending to buy back the same stock, you must not 'trigger' the Wash Sale Rule or you are forbidden to take the loss. Examples.  Lets presume you own 1000 shares of a stock and it's trading 25% below where you bought it, and you want to capture the loss to use on your taxes. This can be a very important consideration if trading index ETF's  if you have a loss in something like a S&P500 ETF, you would likely incur a wash sale if you sold it and bought a different S&P500 ETF from another company since they are effectively the same thing.  OTOH, if you sold an S&P500 ETF and bought something like a 'viper''total stock market' ETF it should be different enough to not trigger the wash sale rule.  If you are trying to minimize the taxes you pay on stocks, there are basically two rules to follow.  1) When a gain is involved, hold things at least a year before selling, if at all possible.  2) Capture losses when they occur and use to offset gains, but be sure not to trigger the wash sale rule when doing so. I appreciate it. I didn't operate under selling the asset year five but other than that I followed this example. I appreciate the help. These assignments are just poorly laid out. Financial management also plays on different calculation interactions  so it is difficult for me to easily identify the intent at times. Thanks again. Could be. I haven't read the law or how its written nor am I a lawyer. Just saying there's usually a way around these things.   They could also make the business decision that the risk of lost sales is worth the potential lawsuit loss.   We're all just pontificating here ¯\_(ツ)_/¯ "It sounds like this is an entirely unsettled question, unfortunately.  In the examples you provide, I think it is safe to say that none of those are 'substantially identical'; a small overlap or no overlap certainly should not be considered such by a reasonable interpretation of the rule. This article on Kitces goes into some detail on the topic.  A few specifics. First, Former publication 564 explains: Ordinarily, shares issued by one mutual fund are not considered to be substantially identical to shares issued by another mutual fund. Of course, what ""ordinarily"" means is unspecified (and this is no longer a current publication, so, who knows). The Kitces article goes on to explain that the IRS hasn't really gone after wash sales for mutual funds: Over the years, the IRS has not pursued wash sale abuses against mutual funds, perhaps because it just wasn’t very feasible to crack down on them, or perhaps because it just wasn’t perceived as that big of an abuse. After all, while the rules might allow you to loss-harvest a particular stock you couldn’t have otherwise, it also limits you from harvesting ANY losses if the overall fund is up in the aggregate, since losses on individual stocks can’t pass through to the mutual fund shareholders. But then goes to explain about ETFs being very different: sell SPY, buy IVV or VTI, and you're basically buying/selling the identical thing (99% or so correlation in stocks owned).   The recommendation by the article is to look at the correlation in owned stocks, and stay away from things over 95%; that seems reasonable in my book as well. Ultimately, there will no doubt be a large number of “grey” and murky situations, but I suspect that until the IRS provides better guidance (or Congress rewrites/updates the wash sale rules altogether!), in the near term the easiest “red flag” warning is simply to look at the correlation between the original investment being loss-harvested, and the replacement security; at correlations above 0.95, and especially at 0.99+, it’s difficult to argue that the securities are not ”substantially identical” to each other in performance. Basically - use common sense, and don't do anything you think would be hard to defend in an audit, but otherwise you should be okay." "According to page 56 of the 2015 IRS Publication 550 on Investment Income and Expenses: Wash sales. Your holding period for substantially identical stock or securities you acquire in a wash sale includes the period you held the old stock or securities. It looks like the rule applies to stocks and other securities, including options. It seems like the key is ""substantially identical"". For your brokerage / trading platform to handle these periods correctly for reporting to IRS, it seems best to trade the same security instead of trying to use something substantially identical." My memory served me correctly. I remember this because it was on my Series 7, so that link is misleading if you are studying for the 7. Here is the exception:  &gt; Transactions to Which the Rule is Not Applicable (Proposed FINRA Rule 2121(d)) Consistent with the initial proposal, FINRA Rule 2121(d) provides that FINRA Rule 2121 is not applicable to: (1) **the sale of securities where a prospectus** or offering circular must be delivered and the securities are sold at the specific public offering price, based on NASD IM-2440-1(d); and (2) a transaction in a non-investment grade debt security with a QIB that meets the conditions set forth in proposed FINRA Rule 2122(b)(9), which is described below.  If you're studying for the 7, you will know that every mutual fund sale requires the delivery of a prospectus. From the IRS Section 1091. Loss from Wash Sales of Stock or Securities  Section 1091(a) provides that in the case of any loss claimed to have been sustained from any sale or other disposition of shares of stock or securities where it appears that, within a period beginning 30 days before the date of such sale or disposition and ending 30 days after such date, the taxpayer has acquired (by purchase or by an exchange on which the entire amount of gain or loss was recognized by law),or has entered into a contract or option so to acquire, substantially identical stock or 3 securities, then no deduction shall be allowed under § 165 The document is not long, 4 pages, and should be read to see the intent. It's tough to choose the one snippet, but the conclusion is this is the definitive response to that question.  A purchase within an IRA or other retirement account can create a wash sale if such a purchase would be a wash sale otherwise, i.e. the fact that it's a retirement account doesn't avoid wash rules. "Simply paying him back the 50K to reduce ""his equity"" back to 30% doesn't necessarily mean that he still doesn't have a higher liq pref upon a liquidation event. You don't need the legal language to know...I deal with term sheets all the time, I don't deal in the legal language, we cut the deal with the term sheet and leave the legal language to the lawyers." Purchases and sales from the same trade date will both settle on the same settlement date. They don't have to pay for their purchases until later either. Because HFT typically make many offsetting trades -- buying, selling, buying, selling, buying, selling, etc -- when the purchases and sales settle, the amount they pay for their purchases will roughly cancel with the amount they receive for their sales (the difference being their profit or loss). Margin accounts and just having extra cash around can increase their ability to have trades that do not perfectly offset. In practice, the HFT's broker will take a smaller amount of cash (e.g. $1 million) as a deposit of capital, and will then allow the HFT to trade a larger amount of stock value long or short (e.g. $10 million, for 10:1 leverage). That $1 million needs to be enough to cover the net profit/loss when the trades settle, and the broker will monitor this to ensure that deposit will be enough. A bank selling a foreclosed property would negotiate a lower cash deal, I doubt it would be that extreme, 130 vs 100.  An individual seller may give up $10K to save time and get his next home closed as well, but again, I suspect it would be rare to find that large a delta. Lacking in any nuance as well...  For a while, the trend has been that more generic / flow products are on the downswing for profitability (while some individual traders are still outliers), but the stuff that is not able to be commoditized is actually paying more in many cases.  Essentially, follow the money, and look at more than the surface. CashBase has a web app, an iPhone app and an Android app, all sync'ed up. It doesn't integrate with banks automatically, but you can import bank statements as CSV. Disclaimer: I'm CashBase's founder.