Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : IRS, Tax related strategies--Traders -- Ignore unavailable to you. Want to Upgrade?

To: mod who wrote (559)	11/12/1998 4:16:00 PM
From: Colin Cody	Respond to of 1383

Dennis, Kaye may post the details, but for now - generally, from memory, if you short against the box now there is no tax effect at all on the sale. If you remain in that position straight through to 2/1/99 then in 1999 it will be considered a SALE for tax purposes. If you close the short (or sell the underlying stock for that matter) before then, you have a a reportable transaction as of THAT date. Therefore you would lock in your gains, taking all risk out of owning the stock NOW, yet not increase your taxable income until 1999. Don't act until you verify this wqith your own tax advisor though. I posted from memory. I never come across short sales against the box in practice, so I am not up on it without researching it. Colin

To: mod who wrote (559)	11/18/1998 11:43:00 PM
From: Kaye Thomas	Read Replies (1) \| Respond to of 1383

If you short-against-the-box in 1998, you can postpone realizing the gain if you cover the short position next year, and be exposed to market risk for 30 or 60 days, is that about right? Do you have to do this by 4/15/99? If you don't unshort though, is the gain realized as 1998 or 1999 income? What I'd like to do is lock in some gains now by shorting-against-the-box, but only if the gains count as 1999 income, not 1998. You have the basic idea. You have to unshort by January 30, then remain unprotected in your long position for 60 days. If you don't do this, you'll recognize your gain as of the date of the short sale (i.e., in 1998). If options are available on your stock, you can protect your downside by buying a put. This may be more expensive than selling short against the box, but if the put isn't in the money when you buy it you won't have a constructive sale, so you won't have to worry about holding a naked long position for 60 days. After December 31 you can close the put and sell the stock at the same time, if you wish, and the gain will be taxed in 1999. One of these days I'll find time to write up constructive sales for my web site. Kaye Thomas, author Fairmark Press Tax Guide for Investors fairmark.com