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[for tax purposes I have been told that they must cover their shorts]
I don't think that's true -- please refer to IRS Publication 550, Investment Income and Expenses, available online at irs.ustreas.gov . I think that you are confusing this with the Section 1256 requirements, which apply to some derivatives held by brokers, such as options. (I know about Section 1256 because it applies to me also, even though I am not a broker. But, I have several derivatives based on broad market indices like the S&P 500 and the Dow 30.) Section 1256 doesn't mean you have to cover anything though -- you just have to declare the market value at the close of business on December 31, and you have to report a capital gain or loss, even if you don't sell. Then, when you actually sell, you have to recalculate your loss or gain for tax purposes. Ah, the joys of being required to fill out a Form 6781...
Anyways, as far as I know, I don't think you can short IAUS (or buy it on margin for that matter), because the price is below 5 dollars a share. I recall some regulation to that effect, and the paperwork for various brokerage accounts also mentions this.
Paul McGinnis / PaulMcG @ aol.com |
