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. However, there is an exception. If you own stock or securities identical to those that you sold short when you entered the contract (“selling short against the box”) and they had appreciated in value since you bought them, you recognize gain or loss when you sell short. Refer to Constructive Sales of Appreciated Financial Positions in either the Instructions for Form 1040, Schedule D or Chapter 4 of Publication 550, Investment Income and Expenses for more details and exceptions.
Related Questions
- 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?
- Is there any way for a sale to be PST exempt if a vehicle was sold to a Status Indian prior to September 12, 2006?
- Where can I find example short sale cover letters?
