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?
If you are able to defer the reporting of gain or loss until the year the short sale closes, you will need to attach a statement to your Form 1040, Schedule D(PDF) explaining the details of your short sale and that it has not closed as of the end of the year. This will allow you to reconcile your Form 1099-B (PDF) to your Form 1040, Schedule D(PDF) and still not recognize the gain or loss from the short sale. Include your name as it appears on the return and your social security number. For more on these rules and the rules for put options and wash sales refer to Chapter 4 of Publication 550, Investment Income and Expenses. References: Publication 550, Investment Income and Expenses, Tax Tax Topic 409, Capital gains and losses.
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