.png?width=440&name=bryant_logo_lockup_edc_color%20(002).png){kind=logo}
This question is a part of BIF's Special Webinar series which was created to help students affected by the July 2020 CFP® Exam postponement to September 2020.
Identify the transaction that would not trigger a disallowed loss per the wash sale rules:
- Purchase of a call option that can be exercised into the same stock that was sold for a loss.
- An investor sells a bond at a loss, then purchases back the same exact bond.
- The purchase of a bond that is convertible to a stock that was sold for a loss.
- A AA-rated bond issue from a blue-chip company is sold at a loss and the investor purchases another AA-rated bond from a different blue-chip company.
Scroll for answer...
Correct answer: D. A AA-rated bond issue from a blue-chip company is sold at a loss and the investor purchases another AA-rated bond from a different blue-chip company.
Instructor insight:
Unless the investor purchases back the same exact bond or bond fund, it is difficult to violate the wash sale rule with fixed income. Since the bond is issued from different companies, loss associated with the blue-chip to blue-chip transaction would not be subject to the wash sale rules.
CFP® Exam insight:
It's all about time. The entire wash sale window encompasses a 61-day period. This includes a ‘look-back’ to 30 days before the trade date, the trade date, then 30 days after the trade date.
