How to report a short sale on schedule-D?

Discussion in 'Professional Trading' started by NanoTick, Feb 13, 2010.

  1. Say you opened a short position in June 2009 and it remains open on 12/31/2009. Your brokerage reports the sale proceed to IRS. How do you enter this in schedule-D since you have not realized any profit or gain?
     
  2. Enter a buy at the same price so there is no reported tax consequence, otherwise they will be looking for tax on the entire sale with a zero cost basis!
     
  3. If you do this, how will you ever report any gain or loss later when it is realized? I assume the brokerage will not report the "buy to cover" transaction.
     
  4. ken__0

    ken__0

    i dont get this.
    no sale oocured the position remained open
    after all You do not realize gain or loss until delivery of xyz stock to close the short sale.
    We are suppose to report open short positionswith really no change in value now ?:confused:
     
  5. I was 1/2 kidding, I suggest you wait for one of The GREEN CPA dudes to answer responsibly. The sale was already reported so a note of some sort needs to accompany the schedule D to splain it is an open positon to be reported next year. In other words I have no clue and appologize for bad tax advice after the bar!
    :D
     
  6. But if you don't report the short sales (the "sell to open"), there will be a huge discrepancy with the 1099 your broker sent to IRS, because these "short sales" are reported as if the are sales of a long position!
     
  7. ken__0

    ken__0

    the only thing that can be derived from this is that the ded reserve in connection with the irs are conspiring against traders world wide ..
    its easy just go by year end list that penson sends.
    and wait for the audit .:(
     
  8. you dont report until its realized.
     
  9. How do you 'splain to The IRS the discrepancy between 1099 reported sales and your return then?

    This is the issue here. If you DO NOT report it, The IRS assumes a zero cost basis and sends you a bill.

    It needs to be accounted for, not reported as a taxable event until the buy to cover occurs.
     
  10. #10     Feb 14, 2010