Short Sell Against the Box

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Short Sell Against the Box

Describing the action of short selling a security one owns. When one sells against the box, gains and losses are equalized by the long position on a security combined with the short position created by the short sale. One formerly sold against the box generally in order to be able to claim profits on the sale in the following tax year, but the Taxpayer Relief Act of 1997 largely removed this loophole.
References in periodicals archive ?
Even though this is still possible, from an economic perspective, short sales against the box designed to avoid constructive sale treatment have now become risky transactions.
If this proposed legislation is enacted, the use of short sales against the box as an income tax planning technique would end.
To prevent taxpayers from eliminating the economic risk of loss and the opportunity for gain in appreciated property without recognizing taxable gain, and in order to more clearly reflect income from the sale of stock or other securities, President Clinton's proposed fiscal 1997 budget includes two revenue provisions addressing short sales against the box.
Consequently, this proposal would eliminate taxpayers' ability to avoid immediate recognition of gain through short sales against the box.