wash sale

The offsetting sale and purchase of the same or similar asset within a short time period. For income tax purposes, losses on a sale of stock may not be recognized if equivalent stock is purchased within thirty days before or thirty days after the date of sale. I.R.C. No. 1091. Transactions resulting in no change in beneficial ownership. Ernst v. Hochfelder, 425 U.S. 185, 205, 96 S.Ct. 1375, 1386, 47 L.Ed.2d 668.

A fictitious kind of sale, disallowed on stock and other exchanges, in which a broker who has received orders from one person to buy and from another person to sell a particular amount or quantity of some particular stock or commodity simply transfers the stock or commodity from one principal to the other and pockets the difference, instead of executing both orders separately to the best advantage in each case, as is required by the rules of the different exchanges. Such practices of wash sales and matched orders by brokers to give impression of active trading in such securities are prohibited by SEC. 15 U.S.C.A. No. 78i(a).

See also sale

+ wash sale

In security trading, a spurious transaction in which the same stock is sold and bought by the same person to create the impression of market activity or to establish a market for the stock. Such transactions are forbidden