Wash Sales: Considerations in Grant Practices and Forced Sales to Avoid Causing Delay of Employee Loss Deductions

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IRS "wash sales" rules designed to prevent tax manipulation by a taxpayer who attempts to recognize a loss while maintaining an identical or nearly identical investment position demand critical attention in the employment context because an employer may inadvertently subject its employees to the rules, and cause an employee's loss recognition to be delayed, even where the employee has no knowledge of or control over the triggering event.

This article, co-authored by Cleary Gottlieb counsel Kathleen M. Emberger and associate Caroline F. Hayday, appears in the June 2008 issue of Cleary Gottlieb's M&A and Corporate Governance Report.