Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

A sale for a loss would trigger the wash sale rule if the same security is repurchased within ____________________.

1. 15 days of the sale

2. 30 days of the sale

3. 60 days of the sale

4. 90 days of the sale

The correct answer is: 30 days of the sale

The wash sale rule is a regulation set by the IRS that aims to prevent taxpayers from claiming a tax deduction for a security sold at a loss if they repurchase the same security within a specific time frame. In this case, the correct answer indicates that if the same security is bought back within 30 days after the sale that occurred at a loss, it would trigger the wash sale rule. This rule is significant for investors because it affects how capital losses can be used to offset capital gains. If a sale is considered a wash sale, the loss cannot be deducted for tax purposes and instead gets added to the cost basis of the repurchased security. This means that while the immediate tax benefit of the loss is lost, it is deferred until the repurchased security is sold. The time frame involved in the wash sale rule is critical for tax planning and investment strategies, which is why it is essential for individuals engaged in trading securities to be aware of this regulation. The other options do not align with the timeframe established by the IRS for wash sales, thus reinforcing the importance of the 30-day period.