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.

Biotech / Medical : Paracelsian Inc (PRLN) -- Ignore unavailable to you. Want to Upgrade?

To: John H. Farro who wrote (4182)	2/9/1999 9:55:00 AM
From: Jonathan Schonsheck	Read Replies (1) \| Respond to of 4342

Threaders Short and Tall, My research on this topic continues, but I believe that the following is accurate. When a person shorts a stock, s/he borrows the stock from a broker and sells it. From the IRS point of view, the proceeds of that sale constitute a loan, and thus not income -- so no tax liability. When the short is "covered" - the person buys back the same number of shares, and returns them to the broker - then the transaction is complete. If the person has made a profit, then there are tax consequences. However: if the Company that has been shorted goes bankrupt, its shares are worthless; the brokerage does not want the borrowed shares paid back. The person who shorted the stock (and of course has the proceeds) thus has that money, but no tax liability. Now I do not know how long this status continues. At a minimum, one has the use of the money for a long time, tax-free; it is possible that there is never a tax liability - it is considered "borrowed money" forever. Can anyone help on this issue? Is the money tax-free forever? The relevance of all this should be obvious. IF there is a significant short interest in PRLN, then a number of people have been fervently hoping for our Company to go bankrupt. (Whether anyone took any steps to encourage it is an different, and VERY interesting question . . ..) And IF there is a significant short interest, those people have to be pretty concerned about current events - and are, I suspect, likely to (run for) "cover" in the near future. Jonathan