Regulation & Taxes (incl. Wash Sale Rule)

Level: Intermediate · About 12 min · 6 slides + PDF

The SEC and FINRA set the rules for markets and brokers. For taxes, short-term gains are taxed as ordinary income, long-term gains at lower rates, and the wash sale rule can disallow a loss if you rebuy within 30 days before or after the sale. Rates change, so always check the IRS for the current year and consult a tax professional.

🔑 Key takeaways

• SEC oversees markets (Rule 10b-5 bans fraud and insider trading). FINRA regulates brokers.
• Wash sale: rebuy within 30 days before or after a loss sale → the loss is disallowed and added to your new basis.
• Rebuying in an IRA can make the loss permanently disallowed.
• Short-term (1 year or less) = ordinary income rates. Long-term = 0/15/20% (+3.8% NIIT for some). Check the current year.
• Report on Form 8949 / Schedule D. Track trades and consult a CPA.

✅ Your homework

1. Download last year's 1099-B from your broker and find any wash-sale adjustments.
2. Mark your calendar 30 days before and after any loss you plan to take.
3. Look up this year's capital gains brackets on IRS.gov.
4. Write down questions for a CPA about trader tax status.

📎 Resources

• Wash Sale Rule guide (PDF)
• IRS Publication 550 (Investment Income and Expenses)
• IRS Topic No. 409 (Capital gains and losses)
• IRS Topic No. 429 (Traders in securities)
• SEC Rule 10b-5; FINRA Regulatory Notice 26-10
• ADT Academy: https://americandreamtradingacademy.com