short against the box

Short against the box

A short sale of a stock is where the seller actually owns the stock, but does not want to close out the position.

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.

short against the box

To sell an owned security short, usually in order to carry a profit on the security into the next tax year. Delivery may be made by using the owned shares or by purchasing new shares in the market. The Taxpayer Relief Act of 1997 largely eliminated shorting against the box as a means to defer a gain into a future year. Also called against the box, selling short against the box.
References in periodicals archive ?
If the short seller actually owns the stock but borrows it anyway, that kind of sale is called a short against the box.
Using a short against the box - selling borrowed stock the investor actually owns for future delivery - allows investors to raise cash for diversification and lock in a gain.
Effective for constructive sales after June 8, 1997, the TRA '97 removed from sophisticated investors the tax-deferral component inherent in "selling short against the box," futures contracts, forward contracts, equity swaps and notional principal contracts.
Thus, an investor who sells 100 shares of XYZ stock short against the box and closes the sale at a gain by delivering 100 shares of XYZ stock he has held for more than one year generally will recognize a long-term capital gain.
73-524, an individual sold 200 shares of stock short against the box.