10.2 Capital Gains, Losses/Sale of Home: Stocks (Options, Splits, Traders)
If a stock was sold short prior to the end of the year but was purchased
in the next year to cover the short sale, when should it be included on Schedule
D?
Generally, gain or loss is realized on a short sale when you deliver the
stock that "covers" the short sale, not at the time you sell short. Gain (but
not loss) on a short sale may be recognized earlier under constructive sale
rules if the taxpayer subsequently acquires the same or substantially identical
property to the property sold short.
Refer to Constructive Sales of Appreciated Financial Positions in
Chapter 4 of Publication 550, Investment Income and Expenses for more
details and exceptions.
References:
Since the date acquired is after the date sold, how should I report
a short sale on Schedule D?
This can be confusing with a short sale since it is really a two-step process.
The date sold is the date that the transaction closes, which is the date you
deliver to the lender the stock or (other assets) that cover the short sale.
The date acquired is the date you purchased the stock (or other assets) delivered
to the lender.
Normally, the short sale of a capital asset is considered to result in
short-term gain or loss since the stocks (or other assets) that are delivered
to "cover" the short sale are purchased the same time as the delivery. However,
if stock held by the taxpayer for greater than one year is used cover the
short sale, then the gain or loss is long-term.
References:
I held stock substantially identical to the stock I sold short,
but I covered the short sale with shares that I purchased later. How does
that affect the way I report the short sale?
If you held substantially identical stock at the time of the short sale,
but you subsequently acquired new stock to close the transaction, gain or
loss would still be recognized when you close the short sale. However, the
loss would be long-term if you held the substantially identical property more
than one year at the time of the short sale, regardless of what stock was
delivered to close the transaction.
For more information on constructive sales, refer to Constructive
Sale treatment for Certain Appreciated Positions in Chapter 4 of Publication 550, Investment Income and Expenses.
References:
Should I advise the IRS why amounts reported on Form 1099-B do not
agree with my Schedule D for proceeds from short sales of stock not closed
by the end of year that I did not include?
If you are able to defer the reporting of gain or loss until the year the
short sale closes, the following will allow you to reconcile your Forms 1099-B
to your Schedule D and still not recognize the gain or loss from the short
sale:
Your total of lines 3 and 10, column (d), on your Schedule D should equal
your total gross proceeds reported to you on all Forms 1099-B.
In columns (b) and (c) write "SHORT SALE," and
in column (f) write "See attached statement."
In your statement, explain the details of your short sale and that it
has not closed as of the end of the year. Include your name as it appears
on the return and your social security number.
For more on these rules and exceptions that may apply, refer to Chapter
4 of Publication 550, Investment Income and Expenses.
References:
How do I determine my gain or loss on the proceeds reported on Form
1099-B from a short sale entered into last year if I have not yet bought the
stock to deliver back to my broker?
In general, you cannot determine your gain or loss until you purchase the
stock that you are going to deliver to close the short sale. You still need
to report the gross proceeds on Schedule D so that the total of lines 3 and
10, column (d), reconciles with all of your Forms 1099-B.
Also, in columns b and c write "short sale." In column f, write "see attached
statement." In the statement, explain the details of the short sale and that
it is not closed. Include your name as it appears on your return and your
social security number.
For more information on rules and exceptions that may apply, refer to Chapter
4 of Publication 550, Investment Income and Expenses.
References:
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