Stan Veliotis investigates the “wash gain” strategy and whether it would survive IRS or court scrutiny

Stan Veliotis, associate professor and CPAP co-director, authored “Do Tax-Motivated Wash Gain Sales Pass Economic Substance Muster?” The article was published in the winter 2018 edition of The Tax Lawyer. Veliotis analyzes whether the wash gain strategy would survive an IRS or court review. For nearly a century, the Code has explicitly disallowed wash sale losses (i.e., losses from selling a security that the taxpayer repurchased within a 60-day window). In contrast, the Code does not explicitly disallow wash sale gains, which many academic, practitioner, and business journals have suggested as a way to save taxes (e.g., avoid future increase in tax rates on gains, avoid loss of carryover). The article shows how the economic substance doctrine, and its many related doctrines, likely would disallow wash gains if reviewed by the IRS or courts.