
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 106-554 Section 1(a)(7)[401(d)]]
[CITE: 26USC1091]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
          Subchapter O--Gain or Loss on Disposition of Property
 
                     PART VII--WASH SALES; STRADDLES
 
Sec. 1091. Loss from wash sales of stock or securities


(a) Disallowance of loss deduction

    In the case of any loss claimed to have been sustained from any sale 
or other disposition of shares of stock or securities where it appears 
that, within a period beginning 30 days before the date of such sale or 
disposition and ending 30 days after such date, the taxpayer has 
acquired (by purchase or by an exchange on which the entire amount of 
gain or loss was recognized by law), or has entered into a contract or 
option so to acquire, substantially identical stock or securities, then 
no deduction shall be allowed under section 165 unless the taxpayer is a 
dealer in stock or securities and the loss is sustained in a transaction 
made in the ordinary course of such business. For purposes of this 
section, the term ``stock or securities'' shall, except as provided in 
regulations, include contracts or options to acquire or sell stock or 
securities.

(b) Stock acquired less than stock sold

    If the amount of stock or securities acquired (or covered by the 
contract or option to acquire) is less than the amount of stock or 
securities sold or otherwise disposed of, then the particular shares of 
stock or securities the loss from the sale or other disposition of which 
is not deductible shall be determined under regulations prescribed by 
the Secretary.

(c) Stock acquired not less than stock sold

    If the amount of stock or securities acquired (or covered by the 
contract or option to acquire) is not less than the amount of stock or 
securities sold or otherwise disposed of, then the particular shares of 
stock or securities the acquisition of which (or the contract or option 
to acquire which) resulted in the nondeductibility of the loss shall be 
determined under regulations prescribed by the Secretary.

(d) Unadjusted basis in case of wash sale of stock

    If the property consists of stock or securities the acquisition of 
which (or the contract or option to acquire which) resulted in the 
nondeductibility (under this section or corresponding provisions of 
prior internal revenue laws) of the loss from the sale or other 
disposition of substantially identical stock or securities, then the 
basis shall be the basis of the stock or securities so sold or disposed 
of, increased or decreased, as the case may be, by the difference, if 
any, between the price at which the property was acquired and the price 
at which such substantially identical stock or securities were sold or 
otherwise disposed of.

(e) Certain short sales of stock or securities

    Rules similar to the rules of subsection (a) shall apply to any loss 
realized on the closing of a short sale of stock or securities if, 
within a period beginning 30 days before the date of such closing and 
ending 30 days after such date--
        (1) substantially identical stock or securities were sold, or
        (2) another short sale of substantially identical stock or 
    securities was entered into.

(f) Cash settlement

    This section shall not fail to apply to a contract or option to 
acquire or sell stock or securities solely by reason of the fact that 
the contract or option settles in (or could be settled in) cash or 
property other than such stock or securities.

(Aug. 16, 1954, ch. 736, 68A Stat. 319; Pub. L. 94-455, title XIX, 
Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 98-369, div. 
A, title I, Sec. 106(a), (b), July 18, 1984, 98 Stat. 629; Pub. L. 100-
647, title V, Sec. 5075(a), Nov. 10, 1988, 102 Stat. 3682; Pub. L. 106-
554, Sec. 1(a)(7) [title IV, Sec. 401(d)], Dec. 21, 2000, 114 Stat. 
2763, 2763A-649.)


                               Amendments

    2000--Subsec. (f). Pub. L. 106-554 added subsec. (f).
    1988--Subsec. (a). Pub. L. 100-647 inserted sentence at end defining 
``stock or securities''.
    1984--Subsec. (a). Pub. L. 98-369, Sec. 106(b), substituted ``no 
deduction shall be allowed under section 165 unless the taxpayer is a 
dealer in stock or securities and the loss is sustained in a transaction 
made in the ordinary course of such business'' for ``no deduction for 
the loss shall be allowed under section 165(c)(2); nor shall such 
deduction be allowed a corporation under section 165(a) unless it is a 
dealer in stocks or securities, and the loss is sustained in a 
transaction made in the ordinary course of business''.
    Subsec. (e). Pub. L. 98-369, Sec. 106(a), added subsec. (e).
    1976--Pub. L. 94-455 struck out ``or his delegate'' after 
``Secretary'' wherever appearing.


                    Effective Date of 1988 Amendment

    Section 5075(b) of Pub. L. 100-647 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply with respect 
to any sale after the date of enactment of this Act [Nov. 10, 1988], in 
taxable years ending after such date.''


                    Effective Date of 1984 Amendment

    Section 106(c) of Pub. L. 98-369 provided that:
    ``(1) Subsection (a).--The amendment made by subsection (a) 
[amending this section] shall apply to short sales of stock or 
securities after the date of the enactment of this Act [July 18, 1984] 
in taxable years ending after such date.
    ``(2) Subsection (b).--The amendment made by subsection (b) 
[amending this section] shall apply to sales after December 31, 1984, in 
taxable years ending after such date.''

                  Section Referred to in Other Sections

    This section is referred to in sections 267, 312, 475, 860F, 1092, 
1223 of this title.
