Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: loopholes One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120825  
Subject: Re: Thorny Tax Questions (cross post per Phil Ma Date: 5/25/2012 11:28 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 2
I'll give question 1 a shot.

The internal revenue code (Section 263(h)) denies the right to deduct these payments if you have not held the stock for more than 45 days; stated another way, it allows you -- but does not require you --to deduct these payments if the short position is open on day 46.

The bad news, however, is that the same provision of the code only permits you to increase your tax basis in the stock purchased to close the short by "the amount not allowed as a deduction under the preceding sentence." The preceding sentence states the 45 day rule.

So, as I read it, you can choose not to take a deduction you're entitled to, but you can't choose to capitalize the foregone deduction as basis in the replacement shares. Reasonable minds may differ.
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

Disclaimer:
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.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
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.
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 "#1 Media Company to Work For" (BusinessInsider 2011)! 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.
Advertisement