Question

A customer who sold a bond at a loss must wait how long before he can buy back a substantially identical bond and not have the sale classified as a wash sale?

1) 20 days
2) There is no waiting period
3) 31 days
4) 5 days

Answer 1

An investor must wait at least 31 days before repurchasing a substantially identical bond to avoid the sale being classified as a wash sale, according to the IRS rules.

Step-by-step explanation:

The question pertains to the IRS wash sale rule, which is a tax regulation.

When a customer sells a bond at a loss, the IRS wash sale rules require that the customer must wait at least 31 days before purchasing a substantially identical bond in order to not have the sale classified as a wash sale. A wash sale occurs when an investor sells a security at a loss and then purchases the same or a substantially identical security within 30 days before or after the sale. If the sale is classified as a wash sale, the loss is disallowed for current tax reporting purposes.

To avoid having a bond sale classified as a wash sale, the investor should wait more than the 30-day period specified by the IRS wash sale rule.