kirby49:
The tax on the short-sale trade is based on the cost basis, $1,000, and the sales price, $4,000.
While the percentage gain in the shorter's account is 75 percent for the year, if that's the only trade, the percentage gain for the short-sale trade is 300 percent. You're talking about two separate things: the percentage gain in the account, and the percentage gain for the trade. One is less than the other, because only 100 shares were shorted. Obviously, the shorter isn't taxed for a 300 percent gain in the account after the trade.
In the next case, with the long trade, 400 shares were purchased. In the short trade, 100 shares were purchased.
If this strikes you as a "new world" approach to percentage gains, welcome to the world of simple math. You'll find that the desks are bigger, there's no recess, and there's more homework. Make a short-sale trade and run it by your accountant. Ask what the cost basis was and the sales price. To calculate the percentage gain, subtract the cost basis from the sales price, divide by the cost basis, and multiply by 100. |
