# CGT on sale of shares - Bed and Breakfast rules



## Brendan Burgess (19 Jun 2018)

This comes up a few times and I could not find an up to date clarification of it.

From the [broken link removed]

Here is the relevant section

_*Disposal of shares within four weeks of acquisition*
The   FIFO  (First In First Out) rules   are   modified   in   any   case   where   shares   of   the   same   class   are   bought   and   sold   within   a   period   of   four   weeks.   Where   shares   are   sold   within   four   weeks   of   acquisition   the   shares   sold   are   identified   with   the   shares   acquired   within   that   period.   Furthermore,   where   a   loss   accrues   on   the   disposal   of   shares   and   shares   of   the   same   class   are   acquired   within   a   four   week   period,   the   loss   is   not   available   for   offset   against   any   other   gains   arising.   Instead   the   loss   is only available for set off against any gain that might arise on the subsequent disposal of the shares so acquired in the   four   week   period   -   this   provision   does   not   apply   where   there   is   a   gain   on   the   disposal.
_
This is the section which says that selling shares and buying them back within 4 weeks does not qualify the gain the for the annual exemption. But I am not sure where it says this?


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## RedOnion (19 Jun 2018)

Brendan Burgess said:


> This is the section which says that selling shares and buying them back within 4 weeks does not qualify the gain the for the annual exemption. But I am not sure where it says this?


Brendan - apologies, my incorrect early morning mumblings might have triggered this.  I'm not aware of any restriction on the use of the annual exemption.


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## Brendan Burgess (19 Jun 2018)

Hi Red

I posted this in response to the question. It was before I had seen your answer. 

I have always understood that the 4 week rule does apply to Bed and Breakfasts but I don't interpret the above as saying so.

Brendan


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## RedOnion (19 Jun 2018)

My very simple understanding is that it's down to the order of transactions.  Say if I own a significant number 'Share A' which has increased in value.  If I sell 100 units, and immediately rebuy them, I can use my exemption.  The 'bed & breakfast' rule doesn;t apply.
However, if I first buy 100 units of Share A, and then sell some units (immediately or within 4 weeks), they are treated on a LIFO basis, so I won't have made a gain, and therefore can't use the exemption (or can only use the exemption to the extent there's been a gain in that window between buying & selling).

I should note that it's a long time since I studied Tax (or made a gain unfortunately!) so I am open to correction.


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## Brendan Burgess (19 Jun 2018)

Alan Moore explains it well here: 

[broken link removed]

_“Bed and breakfast” transactions_

Toward the end of the tax year, you may have a taxable gain but have no loss to offset against the gain. If you have a holding of shares with in-built losses, you may dispose of those shares in order to crystallise the “paper” loss. You may even re-acquire the same shares a few weeks later at a reduced price.

In order to counteract such practices (particularly over a period that spans the last day of the tax year, i.e., 31 December), you may not set against other chargeable gains a loss generated by a disposal and acquisition within the same four-week period. You may set such a loss against the chargeable gain, which eventually arises on the reacquired shares.

This applies a LIFO (Last In First Out) rule to disposals within the four-week period, in contrast to the general FIFO (First In First Out) rule used to identify share disposals with share acquisitions. The end result is that the latest disposal will have a depressed acquisition cost closer to the disposal date, thus reducing or eliminating the paper loss.


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## LoveTrees (21 Jun 2018)

Thank you very much for posting Brendan, it's because if the unclear language in the revenue website not supported by very clear examples (thus leaving grey areas) that I decided that - each time I sell a share at a gain after more than 28 days after touching it - then I will wait another 4 weeks before buying it. Of course (most of all) same for a share sold at loss that I am declaring...


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## paul00s (17 Aug 2019)

If i want to sell a share which has appreciated in values in order to use up my CGT allowance am I allowed to buy it back straight away or must I wait 4 weeks?


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## joe sod (17 Aug 2019)

Brendan Burgess said:


> In order to counteract such practices (particularly over a period that spans the last day of the tax year, i.e., 31 December), you may not set against other chargeable gains a loss generated by a disposal and acquisition within the same four-week period. You may set such a loss against the chargeable gain, which eventually arises on the reacquired shares.



in order to keep everything simple because language is tricky here, if you just wait the four weeks between transactions so as not to get caught out with the intricacies of selling within the four week period.
If you have already realised capital gains on share A in say february,
you have paper losses on share B now on say october 30 , so I sell my entire holding in share B on october 30
then I buy back my entire holding of share B in november 30 (after waiting out the 4 weeks)
In this way I have used the losses on share B to offset the realised gains on share A and this is perfectly legitimate in my understanding because I have waited the 4 weeks between selling and re buying.
Even if I have losses on tranch 1 of my holding of say 1000 shares in share B, but I have gains on a later tranch of say 1500 shares in share B,
My understanding is that I can sell the first tranch of 1000 shares  in share B, realise the capital loss and use that to offset the gain on share A as above.
That is all legitimate from my understanding once i wait out the 4 weeks from potentially re buying the 1000 shares in share B.
I think FIFO (first in first out) always applies once you always wait the four weeks between selling and buying.
Im not an expert or anything but thats my understanding from asking many questions before on this topic


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## paul00s (18 Aug 2019)

Hi Joe, thanks for the response, I'm not looking at a loss, I'm looking at a gain I want to realise. I have a number of 'paper' gains this year, I don't particularly want to sell any of them but am looking to use up my CGT allowance this year.

Looking at Brendan's post
_Furthermore, where a loss accrues on the disposal of shares and shares of the same class are acquired within a four week period, the loss is not available for offset against any other gains arising. Instead the loss is only available for set off against any gain that might arise on the subsequent disposal of the shares so acquired in the four week period - *this provision does not apply where there is a gain on the disposal*._

Does that bold section suggest I don't have to wait 28 days to realise a gain and buy the shares back?


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## Gordon Gekko (18 Aug 2019)

No, you don’t. I remember when there was noise a few years back around the potential restriction of existing losses carried forward. People started selling and reacquiring shares to get value for their losses.


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## declan11 (8 Oct 2020)

Can i ask a related question here?
Take a married couple that own different shares in separate accounts. Can one of the couple sell shares to the value of their CGT allowance and the other buy a similar amount of the same shares on the same day. In this way they could avail of the allowance while maintaining their shareholding overall.


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## Stampduty (23 Nov 2020)

Hi

Despite my best efforts in reviewing the posts here and documentation on Revenue.ie, I'm still at a bit of a loss on the 4 week rule and how it can be applied for _gains and/or losses_. I've put together 2 scenarios below which look show the types things I'm trying to understand

My questions here are simple

*Q1 - What is the CGT liability in Scenario A for ABC Ltd. and XYZ Ltd *
*Q2 - What is the CGT liability in Scenario B for ABC Ltd. and XYZ Ltd *
(assuming no other share transactions for year and assuming each scenario is standalone)
If I've missed a worked example of this issue elsewhere on this site - happy to be re-directed.

Thanks for your help.


*Scenario A*_Transaction #__Transaction__Date__Name__Quantity__Price__Value_1​Buy01/01/2019​ABC10​5​50​2​Buy10/01/2019​XYZ10​10​100​3​Buy12/01/2019​XYZ10​12​120​_Are the below calc's correct ? FIFO?, LIFO?_2​Days Gap4​Sell14/01/2019​XYZ5​7​35​===>Sale Value35​Purchase Cost-50​2​Days GapGain / Loss-15​5​Sell16/01/2019​XYZ15​15​225​===>Sale Value225​Purchase Cost-50​Purchase Cost-120​Gain / Loss55​6​Sell30/03/2019​ABC10​10​100​===>Sale Value100​Purchase Cost-50​Gain / Loss50​


*Scenario  B*_Transaction #__Transaction__Date__Name__Quantity__Price__Value_10​Buy01/01/2019​ABC10​5​50​_Are the below calc's correct ? FIFO?, LIFO?_11​Buy10/01/2019​XYZ10​10​100​12​Sell12/01/2019​XYZ10​9​90​===>Sale Value90​Purchase Cost-100​2​Days GapGain / Loss-10​13​Buy14/01/2019​XYZ10​6​60​14​Sell15/01/2019​XYZ10​5​50​===>Sale Value50​Purchase Cost-60​64​Days GapGain / Loss-10​15​Buy20/03/2019​XYZ10​11​110​16​Sell21/03/2019​XYZ10​14​140​===>Sale Value140​Purchase Cost-110​Gain / Loss30​17​Sell30/03/2019​ABC10​10​100​===>Sale Value100​Purchase Cost-50​Gain / Loss50​


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