Message Font: Serif | Sans-Serif
UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev | Next
Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 123515  
Subject: Re: Short Sales Date: 1/10/2002 11:02 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
How is a short sale reported for tax purposes. For instance, if a stock was shorted in 2001 and not covered until 2002, how do you handle that?
also, if shorted and covered in the same year?

Let's start with your second question first. If you short and cover in the same year, you just enter the data as if it were a normal sale. The only difference is that the sale date is earlier than the purchase date. Personally, I also modify the description to indicate a short sale: "100 XYZ Corp. - short", but that's not necessary. Short sales, in the absence of any hedging position are almost always short-term capital transactions (Line 1).

If you short a stock and the short position is still open on 12/31, enter the sale information as before. Enter "Open" for the purchase date. Enter the sale proceeds as the cost basis. This will give you $0 gain/loss (which is correct since you haven't closed the position) yet allow the IRS computers to match the sales data reported by your broker to that reported by you.

In the year that you close the short position, you will report the full transaction.

The key concept with regard to Schedule D is that you don't want to report less sales proceeds than your broker. If you do, you will get a letter from the IRS asking you to explain the discrepancy. The IRS doesn't care if you report more.

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev | Next


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
Foolanthropy 2015!
Fistula Foundation: A World of Good!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.