Series 7 Exam Question 130: Answer and Explanation

Question: 130

In order to avoid a violation of the wash sale rule, an investor who sold a security at a loss cannot repurchase the same security nor anything convertible into the same security for at least

• A. 20 days
• B. 30 days
• C. 45 days
• D. 60 days

Correct Answer: B

Explanation:

B. The wash sale rule was put in place to keep investors from claiming a loss on a security on their tax return while still holding more or less the same position. So if an investor sells a security at a loss, they cannot purchase the same security nor anything convertible into the same security for 30 days (prior or after the sale). Certainly this isn't a situation where an investor will face fines or penalties; they just won't be able to claim the loss.