joetaxpayer <joetaxpayer[at]nospam.com> writes:

- quote -

Right, but the IRS doesn't know it. All the IRS knows
is there was a $45,600 sale in 2003 that the taxpayer
didn't report. Absent any info from the taxpayer, the
IRS has no reasonable choice but to assume zero basis.

And the three-day settlement is irrelevant for the
sale side of a short sale. Interestingly, it does
become relevant for the cover side, but that doesn't
come into play here.

- quote -

I doubt they did.

- quote -

But you do report it on your return.

- quote -

No, he didn't. He had to report the open short position
on his 2003 Sched D. He then reports it again (as a closed
transaction) on his 2004 Sched D.

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

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

On your tax return in 2003, how much did you say you paid
for the 1000 shares of yahoo? If you did not report it at
all, the IRS *will* assume that you paid -0- for it and send
you a bill for the tax plus interest and penalties....

Missy Doyle

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

a_lawrance[at]yahoo.com wrote:

- quote -

I was about to suggest that the three (two?) day settlement
came in to play, but that would have no impact. Also, you
know 1/1 is a Holiday every year. But regardless, your short
sale is an open transaction only completed upon the
repurchase. You may want to check with your broker if there
somehow mis-reported the short sale. You don't report the
short sale as income. It seems you handled it correctly, and
your 2004 return should reflect both transactions.

As my grandmother told my when I asked what shorting was;
"He who sells what isn't his'n, must buy it back, or go to
prison."

Check with broker, then call the IRS, then let us know.
First time I heard of this.

JOE

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

<a_lawrance[at]yahoo.com> wrote:

- quote -

I can't believe your tax professional didn't know
how to do this. Check out the instructions at
http://www.irs.gov/faqs/faq-kw170.html for reporting
short sales.

Good luck,
Gene E. Utterback, EA, RFC

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

<a_lawrance[at]yahoo.com> wrote:

- quote -

The IRS doesn't know that it was a short sale. Your schedule
D should always list *EVERY* sale on it that is shown on
your Forms 1099-B. There is a a cross-matching program run
by the IRS to look for under-reported income.

The technically correct way to handle the IRS notice is to
prepare another Schedule D listing the proceeds of the short
sale and list the cost as the same amount. You should also
prepare an amended return (Form 1040-X) even though the
amounts on the Form 1040 don't change.

In the future, I highly recommend having your tax return
done by a tax professional. There are many rules regarding
the sales (and short sales) of securities that you are
likely blissfully unaware. I also recommend that you spend
time with a tax pro before the end of this year so you can
get a handle on some tax planning ideas.

Gary

--
The above address is fake. If you want to contact me
directly, please send an e-mail to: gary at gdgoodman dot com.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

<a_lawrance[at]yahoo.com> wrote:

- quote -

The way you should have reported this is to report the sale
on Schedule D, and not list any cost or any gain. On the
next line write: Above transaction is a short sale which
remained open on 12/31/03.

And make sure you correctly reported it on your 2004 return!

That makes your Schedule D Sales column balance against your
Forms 1099-B. The IRS does look at that as you found out.

Now go correct this after the fact. If you have the notice,
just write them back explaining this. And in the future,
report the short sale. I don't see why you would need to
amend on a 1040X -=- just attach a detailed letter with your
copy of their notice.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

a_lawrance[at]yahoo.com writes:

- quote -

Did you report this on your 2003 Schedule D like you were
supposed to?

- quote -

Ah -- I guess you didn't.

Of course they have to assume zero basis. They have no idea
what your basis is. What do you expect them to do?

- quote -

Report the short sale properly. I've heard of two ways of
doing it. I believe the "official" way is to not show the
transaction on the Sched D but to attach a statement saying
something like "The reason for the $45,650 difference
between sales proceeds reported on my Schedule D and sales
proceeds reported on 1099-B forms is a short sale of 1000sh
YHOO for $45,650 which remained opened as of 12/31/03."
Another way I've seen it done is to report the sale on Sched
D, filling in the sales proceeds, but both in the basis and
gain/loss column for that entry, write in "OPEN SHORT SALE".

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

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

<a_lawrance[at]yahoo.com> wrote:

- quote -

Since they can't afford psychics they have to rely on you to
tell them about the details of your trades. You were
supposed to report the open short on your 2003 return and
the settled transaction on your 2004. I assume you did the
latter. Send them a note with a copy of your 2004 Schedule
D, and that should take care of it.

--
Phil Marti
Clarksburg, MD

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

I was shocked to get a notice from the IRS saying I had to
pay $15,000 is missed taxes for 2003 and $5,000 in interest
and penalties.

The issue:

On 12/30/2003 I sold short 1000 shares of Yahoo at $45.65.
I covered this for a small loss on 01/01/04.

The IRS says that I didn't report the $45,650 of income in
2003, and I owe tax on it! They are assuming I had a
zero-cost basis for this sale, which can't be fair. Any
advice on how to handle this is appreciated.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >