Basis of stock and Primary source

Hello,
I am a new member in this forum and I really need help in finding a primary source for the following issue:
(This is a Federal Income Tax question)

Say I have 1,000 shares of some corporate stock which I purchased on October 20,2000 for #15,000. Then I sell these shares on January 31, 2001 for $7,000. Then on each of the four days from February 5 through February 8 I buy 500 shares of substantially identical stock for $3000. What will be the effect on my tax and what will be the basis of each of the four batches of new stock?

Basically, I guess the issue is: I have a stock, I sell it, have a loss and use the loss to offset the income. I rebuy the same stock again very soon and generate a loss. Can I use this loss to offset my income? Is there a court rule or any thing in the code that relates to my situation that you know of?

Thank you,
John

You can not deduct the loss. The rule is clearly stated in the Internal Revenue Code and the Regulations: a loss on a sale or other disposition of stock or securities is not allowed if, within a period beginning 30 days before the date of sale or disposition and ending 30 days after that date, the taxpayer has acquired, or entered into a contract to acquire, substantially identical stock or securities. (IRC section 1091(a); Reg. section 1.1091-1).

To figure your basis on each of the 4 batches of stock, take what you paid the total shares ($15,000 + $12,000 = $27,000) less what you sold them for ($7,000), leaving a total basis of $20,000. Divide that by 4 to find the basis of each of the 4 batches of stock. (I assume you started with 2,000 shares because that is the number of shares you repurchased.)

Thank you!