Alex Goorgle <goorgle[at]hotmail.com> wrote:

- quote -

You have to keep margin of (I think) $5/share in your
account while the position is open, so you don't get to
spend that. If you shorted above around $10, you still have
more spendable by keeping the position open. (Of course,
when you close you have to pay tax on the full gain.)

(Note about "worthless" rules: they apply when you're long
and the cost of selling exceeds the value of the sale. What
happens when you're short and there is some (tiny) value,
and a (greater) cost of buying?)

Seth

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"Alex Goorgle" <goorgle[at]hotmail.com> wrote:

- quote -

If the stock is substantially worthless, the transaction is
closed. If it isn't worthless, you don't close the
transaction (or touch the money).

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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- quote -

Your stock may be worth less but it is not "WORTHLESS".
Worthless stock cannot be sold for it has no value.

The worthless securities are treated as though they were
capital assets sold on the last day of the tax year if they
were capital assets in your hands. Report worthless
securities on line 1 or line 8 of Form 1040, Schedule D
(PDF), whichever applies. In columns (c) and (d), write
"Worthless." For additional information, refer to
Publication 550, Investment Income and Expenses (Including
Capital Gains and Losses).

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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goorgle[at]hotmail.com (Alex Goorgle) writes:

- quote -

[snip]

- quote -

Yes.

But what good does that do you? The proceeds of the short
sale are segregated and are unavailable to you (though you
might be able to get your broker to pay you interest on
them). So unless you're going to take out a margin loan
(and pay interest on it), you won't be able to make use of
your gain.

It's no better (or worse) than having a highly-appreciated
long position. You won't pay any tax on that until you
sell, but until you sell, you can't get the money out of the
account, absent a margin loan.

- quote -

No. But watch out for the constructive sale rules.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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"Really successful short-selling" means you short a stock
and it goes to virtually $0, like Enron, Worldcom, etc.

With normal ("long") stock ownership, it is well-known that
you cannot take the loss until you "sell" your worthless
stock, therefore some brokers will do a "courtesy buy" for
$1.

The question is... if you short-sell wisely... and the stock
never comes back... can you simply hold on to the short
position *forever*, and thus *never* pay capital gains tax
on the profit?

Or is there a point when you're simply forced to close the
position, for tax purposes?

(Trivia: Enron still trades today for $0.05/share!)

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