R.D. I got my answer from KPMG about your question on tax treatment, or should I say my question.
Message 3479410
There are two triggers that one must be conscious of when shorting a stock that you are also long on.
One; If you short a stock that you are also long on, in order not to trigger what would be considered a "constructive sale" you must not sell the long position for at least 60 days past the date that you cover the short. In other words, if you short the stock, you must wait for at least 60 days beyond the date that you cover the short before you sell your long position in order to avoid "short tern taxable treatment". Thus, shorting a stock that you are also long on does not bring the effective date of the 18 month "long term" hold position forward to a current date.
Two; You must cover the short by Jan 31st. of the following year or your "long term hold" will be shifted forward to a current date. So, If you short today Feb. 23rd. you have until Jan 31st. 1999 to cover the short or your "long term hold" position will be shifted forward in terms of tax treatment. So, one would want to be cautious if it were say, Dec. 15th., as you would only have six weeks to cover the short or you would loose your "long term capital gain" status on your long term, 18 month, or more position.
So, If you are going to short a stock that you also have a long position in, you must not sell the long position for at least 60 days past the date that you cover the short or you will be taxed at the "short term capital gain" rate. And you must cover the short by Jan 31st. of the next year or your "long term hold" position will be shifted forward to Jan 31st. and you will have to begin the 18 month clock all over again. DWW II
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