How does discouraging wash trades hurt mutual funds? Selling a losing position seems like it would put downward pressure on that particular stock price. Turning

How does discouraging wash trades hurt mutual funds? Selling a losing position seems like it would put downward pressure on that particular stock price. Turning around and buying an equivalent position seems like it would put upward pressure on that particular stock price. The only benefit to mutual funds seems to be that if you tax any money the Ballmer's of the world cash out, then you reduce the amount they can put in. Putting in more money would help the current mutual fund price, sure, but it would also make it more expensive compared to the underlying assets for future purchases of that fund. > It’s mathematically impossible if your portfolio grows to offset each cash out with a paper loss Unless you have a very, very large and distributed portfolio compared to the amount of cash you are taking out any given year. Such as for a billionaire who wants to bequeath their billions to a tax-free charitable trust after they die. > And in your calculations you forget the price I paid into the positions. I was making the math easy for rhetorical purposes. > Suddenly, the tax collector says “this purchase (spending money on the stock) turns your $0 profit into $50 profit, taxes please”. How comes? Because you haven't "realized" the loss in B. Instead you've made a market-manipulating double trade. If I make a loss tomorrow I still have to pay my income taxes. Why should it be different for stock market purchases?