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I haven't had much success with answers to this question, but I'll try one more time. Sorry to keep bothering everybody!

Hypothetical situation:

Suppose I own 1,000 shares of YHOO at Schwab and have held these shares since 1995.

Now suppose I make a living off of playing market-maker. I have one account (say Waterhouse) where I try to buy stocks on the bid. And then I have another account (say Datek) where I attempt to sell at the ask simultaneously.

One day, I decide to play market-maker in YHOO. I successfully and simultaneously buy 1,000 shares long of YHOO at Waterhouse and short 1,000 shares of YHOO at Datek, capturing a 1/4 spread for a small profit.

I exit both sides of the position later in the day to capture this small profit.

Note that since the buy and sell transaction of 1,000 shares on Waterhouse is in a different account than my long-term holdings at Schwab, the 1,000 shares sold can be "identified" as the 1,000 shares I purchased a few hours earlier in the Waterhouse account.

Now, the "intent" of the short position I undertook on Datek was used to hedge the position on Waterhouse, and not my long-term holdings at Schwab. However, as far as I can tell I have no legal way of claiming that this short position was to hedge the long position on Waterhouse and not the one on Schwab.

My question is - what are the tax implications of these transactions? In other words, would the short position on Datek be deemed a "constructive sale" on the Waterhouse shares or Schwab shares? Or can I "identify" which shares the short position hedged? If so, how? By keeping good records?

Thanks for any help you can give me,
Carl Erikson
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