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.

Technology Stocks : The New QLogic (ANCR) -- Ignore unavailable to you. Want to Upgrade?

To: Ken Richard who wrote (19885)	12/25/1998 11:02:00 PM
From: Greg Hull	Read Replies (1) \| Respond to of 29386

Ken, <<My prior tax question is still applicable, which restated in summary is this: If share prices rise above the shorts (that are against the box), is there a gain that has to be realized in the long shares (to be tendered to cover the short) when tendered at the appreciated price. Or, (since 1997) is the taxable event at the time the short against the box is made ???? Does anyone know ? >> No, I don't know. I'll speculate for the sake of discussion and for others to point out my oversights and errors. Here's my understanding: if someone purchases 100 shares of stock at $5, sells short 100 shares at a later date at $7, and covers the short position with the long position at a still later date, taxes would be due on the $200 (100 shares x $2/share). It is my understanding that the tax would be due for the year in which the short sale occurred. In the case of the Series C shareholders, all shares sold short so far would trigger a 1998 taxable event. I will speculate further to say that all common shares will be considered to have been bought on 2/19/98, the date of the purchase of the Series C preferred shares. The basis per share would be the $10,000 each preferred share cost divided by the number of common shares received for that preferred share when it was converted. This basis price is very close to the conversion price, differing by the accretion effect. The difference between the sale price and the basis price would be the taxable income. This brings me to the point that has escaped me so far. If next week I sell short 1000 shares at $50/share of XYZ in which I have no long position, and I do not cover that short sale until 2/1/99, what am I supposed to report on 4/15/99? Am I supposed to report the $50,000 I received from the short sale (which was still open at the end of 1998) or on the difference between the two transactions? What if I did not cover the short position until 5/1/99? The answer to these questions may guide our speculation on the tax consequences of not covering any short positions the Series C shareholders may still have open. My questions are quite basic and I'm sure could be answered competently by quite a few people on other threads, if not this one. If anyone has access to such a resource, Ken, I and probably a few others would be very appreciative. Greg