Wash sale is defined as selling of an asset such as stocks or bonds on a loss and repurchasing of other stocks or bonds of substantially similar nature within a very short period of time frame. This method is often used to realize a loss, so that such losses can be deductible for tax purposes. However, since the IRS has caught on, it made such losses non-deductible in most cases in the United States.
[Last updated in February of 2022 by the Wex Definitions Team]