Selling Short against the Box versus Selling Short
Lepkowski, Sonsa, The CPA Journal
How is selling short against the box different from selling short? When selling short against the box, the seller is in both a long and short position in the same stock. The motive of selling short against the box is to preserve a capital gain and defer taxation until a future date. This hedging technique may delay the recognition of a capital gain to a different tax period or until a more favorable time, such as when there is a reduction in tax rates.
When selling short, the seller has no long position (ownership) of the security, until some future date when the number of shares sold are purchased in the market. In this case, the motive is to make a profit by selling the borrowed securities at a higher price than the price that will have to be paid to purchase the security. The result is a short-term capital gain or loss, regardless of when the property used in closing the short sale is acquired.
When selling short …
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Selling Short against the Box versus Selling Short. Contributors: Lepkowski, Sonsa - Author. Magazine title: The CPA Journal. Volume: 66. Issue: 12 Publication date: December 1996. Page number: 10. © New York State Society of Certified Public Accountants Feb 2009. Provided by ProQuest LLC. All Rights Reserved.
This material is protected by copyright and, with the exception of fair use, may not be further copied, distributed or transmitted in any form or by any means.