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Stocks & bonds: ‘Substantially’ identical?

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in Small Business Tax

Q. I’m having an argument with my broker. He says that buying bonds of one company after selling common stock of the same company triggers the wash-sale rule. I disagree. Who wins? D.T., Sparta, N.J.

A. You do. The wash-sale rule prevents you from claiming a loss on the sale of securities if you buy “substantially identical” securities within 30 days of the sale. Bonds or preferred stock of a corporation are not treated as substantially identical to the common stock of the same corporation.

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