Is there a rule regarding the purchase of a stock that you previously lost money on?

Question

If so, What is the limit? I have ameritrade, is it different for every broker?

Answer 1

Yes, the wash sale rule. You can not claim the loss on your taxes if you repurchase within I think 30 days. It is a tax rule not a broker rule. If you are not concerned about the tax consequense, there is no worry at all. Buy and sell and buy when you wish.

Answer 2

IRS publication 550 page 56 states:

Wash Sales

You cannot deduct losses from sales or trades of stock or securities in a wash sale. A wash sale occurs when you sell or trade stock or securities at a loss, and within 30 days before or after the sale you:

Buy substantially identical stock or securities,
Acquire substantially identical stock or securities in a fully taxable trade, or
Acquire a contract or option to buy substantially identical stock or securities.
If you sell stock and your spouse or a corporation you control buys substantially identical stock, you also have a wash sale.

If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities. The result is your basis in the new stock or securities. This adjustment postpones the loss deduction until the disposition of the new stock or securities. Your holding period for the new stock or securities begins on the same day as the holding period of the stock on securities sold.

Answer 3

There is an SEC rule against trading with unsettled funds. The above response about not being able to trade the same stock in a weeks period is not true. This comes about due to the SEC regulation that you cannot sell a stock that you bought with unsettled funds until those funds settle. So typically if you sell a stock, and that is the only money in your account, then you can use it to buy a stock that day, but cannot sell that stock until the funds from the initial sale are settled.

Answer 4

Just to add to what Muncie said about the wash sale rule: You can sell for a loss then buy that stock right back again and over and over again as many times as you want, and as soon as you're out of that stock for at least 30 days, the wash sale slate is wiped clean and you can now claim those losses. As long as you're out of the stock for at least a 30-day period beginning no later than December 31st, you can claim those losses for that tax year. If you wait later than that, you can't claim those losses until the following year or until you finally get out of the stock for 30 days.

Answer 5

Your first answer is pretty much dead-on. If you sell at a loss, you can't rebuy the same stock within 30 days without screwing up your ability to deduct that loss. And this is IRS regs, not broker regs.

I'm pretty certain the brokerages don't care, as long as you're doing trades they're happy.

Answer 6

Outside of tax treatment, there's no hard and fast rule other than "don't try to make up for prior losses in one trade" which is a psychological rule moreso than a brokerage rule.

As far as restrictions, the only restriction as to buying/selling the same stock is a day trading rule. If you don't have > $25K in your account, you're not allowed to buy/sell the same stock more than four times in a five day period. If you do, you get flagged as a pattern day trader. If that happens, you need to either get more money into your acount, or curb your day trading habits else bunches of nasty stuff happens (like they only allow you to "sell" your positions for 90 days, etc).

Hope that helps!

Answer 7

No. (Unless you are talking about Taxes)