Hey this is tom, and this might be the best christmas gift. You're gon na get all year long check this out. I'm gon na show you a little tax regulation that might be relevant for you, which also was responsible for ruining multiple relationships, because when the wife finds out that you up like that - and you didn't know about this rule, it's gon na be a heap of trouble For you muchacho so check this out, this rule is called the wash sale rule. It sounds like something they do to prison to prisoners who don't shower enough, so they you know they put them in the shower because they smell in the cell.

But in fact it's much more sinister than that, so basically, if you're from the us, the uk or canada, this rule is 100 applicable to you other countries. I'm not sure you have to talk to your cpa, but i'm sure it applies in other countries as well. So you might want to listen, even if you're, not from these three countries, so the wash sale rule is very relevant to what's going on today. Right now, there's eight more days left in this year.

Thank god for that, and in those eight years you might be tempted to do what is commonly referred to as harvesting a tax loss, essentially taking a loss position which you have selling it. So you can materialize this loss basically saying well, here's the loss! Dear internal revenue service and then repurchasing the stock at the same price, by essentially doing nothing basically capturing a loss that you have on paper in actual losses so that you don't pay tax on the other gains you have, you know, might as well right. This is a real loss. This is where you're going to run into a major problem.

If you're from the us, the uk or canada, by the way they do have different names and the most amusing one is the uk name, they don't call it the wash sale rule, they call it. The bed and breakfast rule how british of them also different name in canada, but they all mean the same thing. If you sold the stock and then you repurchased the stock within 30 days or you repurchased a similar or equivalent stock within 30 days, then the internal revenue service or the canadian revenue service or the uk majesty revenue service, whatever they call are not going to give You, the capital loss, it's gone for this year now i'll tell you in a second what happens to this loss, but this year, you're, basically going to run into a situation where these losses, which you thought you have to offset against. Your gains are gone.

So you're selling at last, but you're not getting the loss as a deductible. So here's the thing: what happens to this loss and there's a little trick here, which you also need to understand now, first of all, what happens to the loss is quite simple: it gets moved to the next year or the year after whenever you actually sell the Stocks that you just repurchased, let me give you a living example. Let's say that i bought palantir for a hundred. Let's say that now volunteer is worth 50..

I sell at 50 and every purchase back at 50.. So what happens? Is this loss of 50 dollars which i created gets moved and this stock, which i just purchased for fifty dollars, gets step up and basis to a hundred dollars, so my new basis in the stock i paid for fifty dollars is now a hundred bucks. Essentially, i get a step up in basis in the stock i just repurchased, but i'm not getting lost in the same year. I know it may sound complicated, but the main point you have to understand here: it's basically that the losses aren't really going anywhere.

It's not like the irs is saying: well, the losses are gone, you're never going to be able to claim them. No you'll claim them. When you sell the stock, you just repurchase, so it's only getting delayed so not as bad as you would think, but still would really be sucky, because if you counted on the loss in the same year, then you ran into a really world of trouble. Now, here's the little thing you need to understand here, there's also an int avoidance rule, which is called the tax harvesting rule.

If you sell a stock and then your purchases, basically the stock after the 30 day period. But you had the intention to do so. Just to avoid the wash sale rule, essentially you try to monkey branch yourself around this rule a monkey business, so you buy the stock at 31, 32. 33, even 40 days later, with the whole intention of just slipping out of the 30-day limitation, then the loss will be treated as if it was inside the 30-day period.

So when you repurchase a stock soon right after you sold it, you must have an explanation. Why? You did this, especially if the price hasn't moved now. Obviously, this doesn't apply to profits. If the stock went up, it doesn't really affect you, no warsaw rule.

If the stock goes up, however, there is one good way to avoid this rule altogether, which is trade inside your ira. If you're trading inside your ira and you're selling and buying and selling and buying within 30 days, there is no wash sale rule at all. In fact, whatever happens in your ira, it's like vegas, whatever happens in vegas stays in vegas. Whatever happens inside your ira stays inside your ira, so you cannot trigger a war sale rule if you basically sell and then buy inside your ira, but again also there's no.

The you know the benefit: the tax benefit doesn't exist because there's no capital loss or capital gains. Now i do want to point out an important thing. Certain people have been trying different tactics to get around it, so they'll sell a stock and they repurchase. This.

A few days later inside their ira, so i'm selling a stock outside of my ira and i'm just repurchasing the stock inside the area just to slip away from the washer rule, as if that sort of activity is actually legitimate. Well, the iris, as i've been told just a few days ago by one of my subscribers shout out to gabe, actually has an idea avoidance rule just against that. If you sell a stock in your regular portfolio, but then you repurchase that stock inside your ira portfolio within 30 day period, still the wash sale rule, will apply, there's an anti-avoidance provision. Just for that.

Thank you, gabe for letting me know. I didn't even know that now again these are insanely complicated rules. So before you start selling a loss right before this year ends just to capture the losses, make sure you talk to a cpa or a specialist, so they can tell you what's the best way to do it without getting into a huge fight with your wife over You should have known so you know it's not like i'm talking from experience. I always know my i'm just joking, i'm talking from experience.

In any case, you shout out the channel members and the patrons this was kind of a public service announcement. I know this. Video is not going to get a lot of views so just to compensate me on the loss of use for this video, which is going to be horrendous. Make sure you subscribe right here and there's a video, that's! The algorithm is going to suggest for you right here.

It says it's the best for you, so you probably want to watch that as well. See you tomorrow.