Rules similar to the wash sale rules apply to any disposition of a position or positions of a straddle.

First apply Rule 1, explained next, then apply Rule 2. However, Rule 1 applies only if stocks or securities make up a position that is part of the straddle. If a position in the straddle does not include stock or securities, use Rule 2.

Rule 1. You cannot deduct a loss on the disposition of shares of stock or securities that make up the positions of a straddle if, within a period beginning 30 days before the date of that disposition and ending 30 days after that date, you acquired substantially identical stock or securities. Instead, the loss will be carried over to the following tax year, subject to any further application of Rule 1 in that year. This rule will also apply if you entered into a contract or option to acquire the stock or securities within the time period described above. See Loss carryover, later, for more information about how to treat the loss in the following tax year.

Rule 2. You cannot deduct a loss on the disposition of less than all of the positions of a straddle (your loss position) to the extent that any unrecognized gain at the close of the tax year in one or more of the following positions is more than the amount of any loss disallowed under Rule 1.

Successor positions.

Offsetting positions to the loss position.

Offsetting positions to any successor position.

Successor position. A successor position is a position that is or was at any time offsetting to a second position, if both of the following conditions are met.

The second position was offsetting to the loss position that was sold.

The successor position is entered into during a period beginning 30 days before, and ending 30 days after, the sale of the

loss position.

Dealers. If you are a dealer in stock or securities, this loss treatment will not apply to any losses you sustained in the ordinary course of your business.