Is the wash sale rule applicable if a loss is offset by a gain?

The wash sale rule does not consider whether a loss is offset by a gain. The purpose of the wash sale rule is to prevent taxpayers from claiming a tax deduction on a security sold at a loss and then repurchasing the same or substantially identical security within a 30-day window before or after the sale. This rule applies to prevent taxpayers from realizing a tax benefit from a short-term loss on securities when they essentially maintain their investment position.

If you realized a gain from another transaction, it does not affect the application of the wash sale rule to your loss transaction. The loss disallowed under the wash sale rule is generally added to the cost basis of the newly purchased (or repurchased) security. This effectively defers the loss until the new position is sold in a transaction not subject to the wash sale rule, allowing the deferred loss to potentially offset future gains. However, the presence of a simultaneous gain does not influence whether the rule applies; the critical factor is the repurchase of the same or substantially identical securities within the disallowed period.