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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Redman who wrote (34816)1/11/1999 7:26:00 PM
From: upanddown  Read Replies (1) of 95453
 
Red et al:

Glad to see some discussion of "shorting against the box" and similar strategies. I'd appreciate your opinion on a tax question of mine.

You short a stock using a taxable account. The position begins to go against you and you quickly long the stock in a tax-deferred (IRA) account and neutralize the position. The short continues to go against you. During this rise, you trade the long several times trying to catch bounces and dips. Eventually you close both sides but, depending on market conditions, may or may not leg out of the position. The end result is that you have a significant loss in the taxableshort which is mostly offset by the tax-deferred IRA gain. There has mostly been a funds transfer from taxable to tax-deferred.

My main question is whether the taxable loss is deductible by itself or do long gains in the IRA have to be applied to offset the short loss ? I don't see a wash sale problem and the opinion I have gotten is that there is no connection between taxable and tax-deferred investment activity since the tax-deferred gains will eventually be taxed at withdrawal. Would appreciate your thoughts.

A friend of mine suggested that you could play the internuts this way to legally transfer taxable funds to tax-deferred. I mean, hell, they only go up, right ?<ggg>

John

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