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Rev. Rul. 71-316


Rev. Rul. 71-316; 1971-2 C.B. 311

DATED
DOCUMENT ATTRIBUTES
  • Cross-Reference

    26 CFR 1.1091-1: Losses from wash sales of stock or securities.

  • Code Sections
  • Language
    English
  • Tax Analysts Electronic Citation
    not available
Citations: Rev. Rul. 71-316; 1971-2 C.B. 311
Rev. Rul. 71-316

Advice has been requested whether the following provision of section 1091 of the Internal Revenue Code of 1954, relating to the nondeductibility of losses, applies to sales of securities that have been purchased on margin:

(a) Disallowance of Loss Deduction.--In the case of any loss claimed to have been sustained from any sale or other disposition of shares of stock or securities where it appears that, within a period beginning 30 days before the date of such sale or disposition and ending 30 days after such date, the taxpayer has acquired * * * or has entered into a contract or option so to acquire, substantially identical stock or securities, then no deduction for the loss shall be allowed * * *.

Section 1091(a) specifically states that under the conditions described no deduction shall be allowed for "any loss" sustained in "any sale" or other disposition of shares of stock or securities.

"Margin," as ordinarily used in connection with stock sales, means the sum deposited by a purchaser of stock with his broker, being a certain percentage of the purchase price of the stock, the broker agreeing to advance the balance of the purchase price on condition that he should hold the stock as security for his advances, with the right to sell it in case of depreciation of value and failure of the purchaser to keep the "margin" good.

A sale of securities purchased on margin is a sale.

Accordingly, it is held that section 1091(a) of the Code, relating to the nondeductibility of losses, applies to the sale of securities that have been purchased on margin.

The above is illustrated by the following example. On July 1, 1970, a taxpayer purchased 100x shares of M company stock for cash. On July 15, 1970, the taxpayer purchased 100x shares of M company stock on margin. On July 29, 1970, he sold the 100x shares of M company stock purchased on margin at a loss. Section 1091 of the Code precludes the taxpayer from deducting the loss since he acquired substantially identical stock within a period beginning 30 days before the date of the sale resulting in a loss.

DOCUMENT ATTRIBUTES
  • Cross-Reference

    26 CFR 1.1091-1: Losses from wash sales of stock or securities.

  • Code Sections
  • Language
    English
  • Tax Analysts Electronic Citation
    not available
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