In a nutshell a wash sale is strictly a tax gambit, usually a long term tax sale for a tax write off versus a tax profit for the year you do it in. In a simple case the only risk you take is the required waiting period is 30 days in which the stock could do anything. If the stock goes lower and you wait 30 days to repurchase you were a genius. If in 30 days it's at the same price or even a little higher you are also quite smart, however if the stock takes off and goes haywire and in fact goes over what you bought it for initially then you guessed wrong......But generally it always works out..........Initial purchase 1000 shares at $.25 a share =$250.00......Wash sale @ $.05 a share. ...Loss taken of $.20 a share or $200.00 against any profit you may have elsewhere....After the required 30 day waiting period you buy back your stock in a couple of ways, either with the same amount you got from your wash sale $.05 X 1000 shares =$50.00 in which case you have the same amount of monies to spend to rebuy the stock no matter what the price it is at the time. If it is the same as what you sold it as $.05 then you have just taken a great tax write off and still have the same amount of stock.....Unless the stock goes crazy in those 30 days but just goes up a bit, say to $.10 a share then you can spend that $50.00 for 500 shares of stock. If however you wish to replace the entire 1000 shares of stock @ $.10 it would cost you only $100.00......$150 less than your original cost for 1000 shares....SMART ......This latter scenario is generally what happens.....However there is still the risk.
