In 2012 I shorted a stock where I had to pay $100 of dividends in lieu. I held the short position for less than 45 days, so I need to adjust the cost basis upward. Here's my question: I'm guessing that in column (f) I should put O, in column (g) I should put 100, and I should attach an explanation statement stating that the $100 is an adjustment for dividends I paid. Does this seem like the correct way to report it? (I don't think that code E, for selling expenses, would be appropriate, and I don't see any other ones that would apply.)
NO. See "Payments in lieu of dividends." in IRS Pub 550, page 59 http://www.irs.gov/pub/irs-pdf/p550.pdf
Tiddly, that IRS pub says: "If you close the short sale by the 45th day after the date of the short sale (1 year or less in the case of an extraordinary dividend), you cannot deduct the payment in lieu of the dividend you make to the lender. Instead, you must increase the basis of the stock used to close the short sale by that amount." So I do think I need to increase the basis and my question is about which code to use in the 8949.
It is a simple adjustment to basis. If you've got a 1099-B and the payment is not accounted for, it's code "B" and follow the instructions. Otherwise no code, it's just the basis (and there is no 1099)
No Problem. But more important, it's the right solution! And as bonus, will not attract attention to the $100.