Final answer:
The basis of property in a wash sale is indeed the cost plus the disallowed loss. This measure prevents the loss from being claimed immediately and defers the recognition of that loss until the new stock is sold.
Step-by-step explanation:
The statement that the basis of property acquired in a wash sale is its cost plus the loss not recognized on the wash sale is true. A wash sale occurs when an investor sells or trades securities at a loss and within 30 days before or after the sale, acquires a 'substantially identical' stock or security, or acquires a contract or option to do so. The Internal Revenue Service (IRS) disallows the loss from the wash sale for immediate tax deduction. Instead, the disallowed loss is added to the cost basis of the new stock. Therefore, the new basis will be the cost of the new stock plus the disallowed loss from the sale of the old stock. This adjusted basis in the new stock ensures that the previously disallowed loss is not lost but deferred until the ultimate sale of the new stock.