Tax Rule · IRC §1091
A wash sale happens when you sell a stock or security at a loss and, within 30 days before or after that sale, buy substantially identical stock or securities. When that happens, IRC §1091 disallows the loss — you cannot deduct it for that year.
But the loss is not lost. It rolls into the cost basis of your replacement shares, so you recover it later. Here is exactly how the rule works, straight from the statute.
Primary source
26 U.S. Code §1091 — Loss from wash sales of stock or securities
§1091(a) measures a single period centered on your loss sale: 30 days before, the day of the sale, and 30 days after. Buy substantially identical stock anywhere in that span and the loss is disallowed.
30 days before
Replacement buy here? Disallowed.
30 days after
Replacement buy here? Disallowed.
61 calendar days in total. The window does not reset — a single qualifying purchase anywhere inside it triggers §1091.
§1091(a) applies to a loss "claimed to have been sustained from any sale or other disposition of shares of stock or securities." The statute expressly extends "stock or securities" to contracts or options to acquire or sell them.
Within the 61-day window you acquire — by purchase, by a taxable exchange, or by a contract or option to acquire — substantially identical stock or securities. The phrase is not defined by a bright line, so it is judged on the facts.
When both are present, "no deduction shall be allowed under section 165" — the general loss-deduction section — unless you are a dealer in securities and the loss arose in the ordinary course of that business.
What happens to the disallowed loss
§1091(d) is the subsection that turns a "lost" deduction into a timing difference. The disallowed loss is added to the cost basis of the replacement shares. The statute sets your basis as the basis of the shares you sold, adjusted by the difference between what you paid for the replacement and what you sold the originals for.
What this means in practice
Rules similar to §1091(a) apply to a loss realized on closing a short sale — or a securities futures contract to sell — if substantially identical securities are sold, or another short sale is entered, inside the window.
A contract or option to acquire substantially identical stock triggers the rule, and §1091(f) confirms it is not exempt just because it can settle in cash instead of the securities themselves.
How §1091 connects
These related Code sections, regulations, and IRS guidance often determine how the rule applies to a particular transaction.
The loss being disallowed
§1091 switches off the deduction §165 would otherwise allow.
Basis of the replacement shares
The disallowed loss is added to your basis here.
Holding period tacking
The holding period of the shares you sold carries over to the replacement shares.
Broker reporting (Form 1099-B)
Your broker reports disallowed wash-sale losses to you and the IRS.
Related-party losses
A separate loss-disallowance rule worth checking alongside §1091.
Straddles
Loss-deferral rules for offsetting positions.
Basis mechanics
The regulation spelling out the §1091(d) basis adjustment.
Sales & dispositions of assets
The IRS plain-language treatment of wash sales.
How courts apply it
Pro+The statute is the start; the case law is where "substantially identical" gets tested. taxmcp.io indexes the Tax Court opinions that cite §1091 — here are two of them, with the full text and citation graph available on Pro+.
Sixty-one days. IRC §1091(a) disallows the loss if you acquire substantially identical stock or securities in the period beginning 30 days before the sale and ending 30 days after it — that is 30 days before, the day of the sale, and 30 days after, 61 days in total. It is a calendar-day window centered on the sale, not a 30-day window.
No, and this is the part most explanations skip. Under §1091(d), the loss you could not deduct is added to the cost basis of the replacement shares. You recover it when you eventually sell those shares (assuming that sale is not itself a wash sale). The holding period of the original shares also tacks onto the replacement shares under §1223, so a long-term position generally stays long-term.
§1091 turns on whether the replacement is 'substantially identical stock or securities,' and the statute expressly includes contracts or options to acquire or sell them. The statute does not define the phrase with a bright line, so it is a facts-and-circumstances question — which is exactly why pinning it to the actual section text, rather than a paraphrase, matters.
Yes. §1091(a) reaches contracts and options to acquire substantially identical securities, and §1091(f) confirms a contract or option is not exempt just because it can settle in cash. §1091(e) extends parallel rules to losses on closing a short sale or a securities futures contract to sell.
§1091(a) carves out a dealer in stock or securities where the loss is sustained in a transaction made in the ordinary course of that business. That is a narrow statutory exception tied to dealer status, not a general 'active trader' exemption.
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Every citation on this page was pulled directly from primary authority and links to the official government text. The statutory source is 26 U.S.C. §1091, last amended in 2002. Verify it yourself at the link.
Current as of October 8, 2026. This is general information about the law, not tax advice for your situation.