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Strategies & Market Trends : Shorting stocks: High fliers
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To: Anaxagoras who wrote (621)1/5/1999 11:56:00 AM
From: Q.  Read Replies (1) of 709
 
re. tax year for capital gains on short sales:

I know covering short sales isn't what Anaxagoras was talking about, but it is of interest to this thread.

here's the question:

In what year do you report your gain/loss when you cover a short sale?

A couple of years ago Barron's had an article that said it was when the securities are the settlement date. I still think that is true:

Here's what the IRS website says:

<<

Short Sales
A short sale occurs when you agree to sell property you do not own (or own but do not wish to sell). You make this type of sale in two steps.

You sell short. You borrow property and deliver it to a buyer.
You close the sale. At a later date, you either buy substantially identical property and deliver it to the lender or make delivery out of property that you held at the time of the sale.
You do not realize gain or loss until delivery of property to close the short sale. You will have a capital gain or loss if the property used to close the short sale is a capital asset.

Exception if property becomes worthless. A different rule applies if the property sold short becomes substantially worthless. In that case, you must recognize gain as if the short sale were closed when the property became substantially worthless.

>>

irs.ustreas.gov

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