How does the wash sale rule apply when trades in quick succession net positive?

External question — Personal Finance Stack Exchange Author: tic Original post: https://money.stackexchange.com/questions/140170 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. This is probably best illustrated with an example: Day 1: I buy 10x AAPL for $1000 Day 2: I sell 10x AAPL for $2000 ($1k gain) Day 3: I buy 10x AAPL for $1000 Day 4: I sell 10x AAPL for $500 ($500 loss) Day 5: I buy call LEAPS on AAPL and hold until next year Come tax season next year, will I owe taxes on $1000 or $500? In other words, does the $500 wash sale get matched with my previous trade (which gets settled this year) or with the LEAPS (which won't be settled until the year I sell)?

External answer — Personal Finance Stack Exchange Author: Bob Baerker Original post: https://money.stackexchange.com/a/140176 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. A LEAP can be a put or a call. I'm going to assume that you mean that your Day 5 transaction is a call LEAP. If so, it is a 'substantially identical' security and therefore it triggers a wash sale violation. You will have to pay taxes on $1,000 since the $500 loss must be deferred.