Will this trade trigger the wash sale rule?

External question — Personal Finance Stack Exchange Author: user607749 Original post: https://money.stackexchange.com/questions/148706 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. i have an example Step 1: bought 1000 shares at 2$ Step 2: Share price dropped to 1$ the same day and added another 1000 same day(averaging down) Step 3: Next day stock increased to 1.5$ i sold 1000 stock(my broker supports only FIFO-first in first out) Step 4: Next day stock dropped to 1$ i am not buying as it can lead to wash sale. Step 5: (QUESTION)if i buy this stock after 1 month will this trade triggers wash sale?

External answer — Personal Finance Stack Exchange Author: Bob Baerker Original post: https://money.stackexchange.com/a/148717 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. If you realize a loss, you’ll have a wash sale you'll have to defer the loss if you acquire substantially identical stock within the 61-day wash sale period consisting of the day of the sale, the 30 days before the sale and the 30 days after the sale. Your purchase of shares in 'Step 2' triggered a wash sale because it was within the 61 day window before/after realizing a loss. If your broker offered the ability to designate lots bot/sold and you realized a gain by combining steps 2 and 3 then it would not be a problem.

External answer — Personal Finance Stack Exchange Author: D Stanley Original post: https://money.stackexchange.com/a/148720 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. No, it would not trigger a wash sale even if you bought the next day . Step 3 was already a wash sale, but it only matters if you hold the stock past the end of the year. If you sell the rest of the stock this year, all transactions are within the same tax year so the wash sale has no effect. If you hold past the end of the year, the wash sale rule just defers the loss until you actually sell. The 0.50 loss this year will be applied to the cost basis of the remaining shares, so your cost basis for those shares will increase to $1.50. So it just means that you pay less tax on the gain (or can claim a loss) when you sell next year (or later). Wash sales do not prevent losses - they just defer them. I would not consider the wash sale a reason not to buy the stock not if you think it will go up (which you obviously do or you wouldn't buy it. The only reason you would wait is if you intentionally sold in order to tax harvest and don't want to undo that.