CAF-2 · Chapter 9 · Question 8 of 15
Mr. Tariq sold a specific listed security at a significant loss. Two weeks later, he repurchased the exact same security to maintain his portfolio risk profile while artificially realizing the capital loss to reduce his tax liability. What is this transaction called, and is the capital loss admissible?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) C) Wash sale; the loss is inadmissible.
Explanation
This is defined as a "Wash Sale" (where a capital loss is realized and the same security is purchased within a one-month period by the same investor to maintain the portfolio). Under Rule 13F, capital loss adjustments for Wash Sales are not admissible.
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