Replacement of Stock and Securities
There are various methods by which stocks and securities can be replaced, each with their own tax implications. Some common replacement tactics are outlined below:
By Gift, Inheritance, Or Tax-Free Exchange
The replacement of stock and securities by way of gift, inheritance, or tax-free exchange will not result in a wash sale. See Reg. Sec. 1.1091-1(f).
Stock Warrants, Convertible Stock
For purposes of the wash sale rule, a stock warrant is considered to be an option to acquire stock of the issuing corporation. (Rev Rul 56-406, 1956-2 CB 523) Preferred stock which is convertible into common stock of the same corporation without restriction is considered to be an option to acquire such common stock. (Rev Rul 77-201, 1977-1 CB 250)
Reducing Purchaser's Holdings
A bona fide sale of a portion of the shares of stock purchased in a single lot for purposes of reducing the purchaser’s holdings in that stock is not a wash sale even though the sale occurs within 30 days after the lot was acquired. (Rev Rul 56-602, 1956-2 CB 257)
Delayed Stock Delivery
A disposition of stock or securities may not be taken out of the definition of a “wash sale” by merely postponing delivery until more than 30 days after the date of the shares of stock or securities are replaced. (Rev Rul 59-418, 1952-2 CB 184) A purchase of substantially identical stock or securities during the 61-day period will trigger the wash sale rule even though the purchase is made on margin or pursuant to subscription rights acquired prior to the beginning of the 61-day period. See Rev Rul 71-316, 1971-2 CB 311; Rev Rul 71-520, 1971-2 CB 311.
Stock Bonus Shares
Where a taxpayer received 10 shares of stock as a bonus from his employer, sold them at a loss, and then within the 61-day period received another bonus of 10 shares of the same stock, the Service ruled that a wash sale had occurred; the tax basis of shares received as a bonus is their fair market value at the time of payment. (Rev Rul 73-329, 1973-2 CB 71)
Employee Stock Options
An employee who, under an employer-employee restricted stock option plan was granted an option to purchase stock of his employer was deemed for purposes of the wash sale rule to have entered into an option to acquire that stock on the date the option is granted; the stock purchased pursuant to such option is deemed to have been acquired on the date the certificates are issued. (Rev Rul 56-452, 1956-2 CB 525)