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 also held substantially identical stock at the time of the short sale, but you acquired new stock to close the transaction, only 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 (PDF), Investment Income and Expenses.
Related Questions
- What new functionality will be available with the new Employee Stock Purchase application with respect to the sale of ESPP shares after the reclassification?
- 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?
- What are the taxation implications if my nib shares are sold in the unmarketable parcel sale facility?
