Tax Q about short sales on Sched D

Discussion in 'Retail Brokers' started by genomik, Mar 7, 2007.

  1. genomik



    I am a relatively new trader, did about a thousand transactions in 2006 with Tradestation. They provide no schedule D so I am (painfully) piecing it together. I think I am 98% of the way but cannot get it exactly to match 1099-B. I have two questions related to this that is probably easy for most of you to answer.

    1) If I entered a short sale in 2006 and exited it in 2007, is that number reported on my 1099 - B in 2006 or 2007? I could see how it could go either way.

    2) Are option transactions placed on sched D as normal transactions? Do they have a special form? If I purchased an option (call or put) in 2006 and sold it in 2007, how does that fit in?

    I know this is sort of easy stuff but I have searched alot on the forums, and even called the IRS and got no confident answers.

  2. (1) A short sale is reported in the current year 1099-B as proceeds. You will not report the gain or loss until the transaction is completed, which in your case was in the current year. However, you do have to provide a reconciliation between the amount reported as proceeds on your 1099-B and the proceeds amount you are reporting on your tax return.

    (2) Equity options are reported via your schedule D but are not included in the total proceeds figure calculated on your 1099-B. Again, you will have to provide a reconciliation between the two.

    Section 1256 contracts (index options, futures, commodities, etc.)are reported via form 6781. Maybe someone else can chime in on these. Only been trading them relatively recently and did not have any related 2006 transactions.

    As a word of caution, take any tax guidance that has been provided to you and CONFIRM that it is correct.