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[[Does anybody know how one can organize a short sale on Schedule D?]]


[[ I understand that if the
short and any cover were made in the same tax year, the net capital gain is treated like any other
capital gain. ]]

Again, least kinda. It is not necessarily treated the same in that your holding period on a short cover may be short term...even if you held the position open for a number of years. This is discussed in great detail in IRS Publication 550. You might want to check it out.

[[What if You shorted a stock in one tax year and did not cover the short for say 2
years. How is this dealt with?]]

You would report the "short" in the year of sale. You would want to do this in order to "tie in" your stock sales records with the information provided to the IRS by your broker. On Sch D, in the "description" area, descirbe the stock as an "open short", show the date sold, and the sales price. In the "gain/loss" area simply write "open short".

When the position is closed in the future, you'll again report the sale, but with the appropriate "purchase", thereby allowing you to report your gain or loss.

[[ Also what if after say 2 Years You decide that your short was not a good idea, and cover the position with a loss. ]]

Then you would have a capitl loss on Sch D when you covered your position.

[[To make it more interesting lets say the loss is
$10,000 (beyond the $3000 limit). I find the explanations in the IRS publications quite ambiguous in
this area. Any help appreciated.]]

Even if the loss is excess of the $3k limit, the limit will still apply. So if this was your only trasaction in the year, you would have a $10k capital loss, $3k currently deductible, and $7k carried over to the next tax year.

TMF Taxes

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