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

To: Greg Hull who wrote (19888)	12/25/1998 11:47:00 PM
From: Ken Richard	Read Replies (1) \| Respond to of 29386

Greg, you stated. <<<<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. >>>> Agreed. There would be a $2. gain due in that tax year, even though it was sold short, because the 1997 tax law now deems that a short sale "against the box" is deemed a constructive sale of the long shares for tax purposes. However, what if now (the next day after the short) the stock price jumps to 10 ? From an equity point of view, it is a moot point, because the shorts are covered by the longs "in the box". But when the shorts are covered by the appreciated longs (after the $7. tax event), and particularly if it is done within 30 days after the short: 1. Is the covering of the short by the long at this point a taxable event? (For instance, an addition #3. gain?) 2. If it is a taxable event and if done within the 30 days, would the wash-sale rule eliminate the loss on the short (and otherwise [assuming it is a taxable event] cause tax due on the tendering of the long at $10? It seems to me that the key to triggering a wash-sale is that shares "are acquired" during the period. If the shares are already in the box, they are not "acquired", and it seems to me logic would dictate that their tender to cover would not be deemed as "acquiring" in order to get credit for the loss. (The typical wash involves going out into the market to purchase (purchase then sell) shares to take advantage of the loss and maintain the position.... Greg, agreed, there has to be knowledgable people lurking. Thanks for your input ...