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Where do I enter my investment expenses for "Dividends paid on short positions"?

Forum|Forum|6 years ago
June 1, 2019
1 reply
0 views

These are direct expenses on stocks sold short -- the company paid a dividend while I held the short position, so the dividend amount was withdrawn from my account to pay to the holder of the "borrowed" stocks sold short. These expenses are not reflected in the 1099-DIV, so where do I enter them?

TurboTax Home & Biz Windows

Best answer by TomYoung

Pub 550 covers this:
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Payments in lieu of dividends.

If you borrow stock to make a short sale, you may have to remit to the lender payments in lieu of the dividends distributed while you maintain your short position. You can deduct these payments only if

you hold the short sale open at least 46 days (more than 1 year in the case of an extraordinary dividend as defined later) and you itemize your deductions.

You deduct these payments as investment interest on Schedule A (Form 1040). See Interest Expenses

in chapter 3 for more information.

If you close the short sale by the 45th day after the date of the short sale (1 year or less in

the case of an extraordinary dividend), you cannot deduct the payment in lieu of the dividend

you make to the lender. Instead, you must increase the basis of the stock used to close the

short sale by that amount
------------------------------------------------------

Tom Young

Employee

Pub 550 covers this:
------------------------------------------------------

Payments in lieu of dividends.

If you borrow stock to make a short sale, you may have to remit to the lender payments in lieu of the dividends distributed while you maintain your short position. You can deduct these payments only if

you hold the short sale open at least 46 days (more than 1 year in the case of an extraordinary dividend as defined later) and you itemize your deductions.

You deduct these payments as investment interest on Schedule A (Form 1040). See Interest Expenses

in chapter 3 for more information.

If you close the short sale by the 45th day after the date of the short sale (1 year or less in

the case of an extraordinary dividend), you cannot deduct the payment in lieu of the dividend

you make to the lender. Instead, you must increase the basis of the stock used to close the

short sale by that amount
------------------------------------------------------

Tom Young

Employee

I cannot deduct this that way unless the total of all my deductions exceeds the standard deduction. It doesn't make any sense to me that I must include dividends I receive as income and cannot deduct dividends I pay out directly against the dividend income I received. It would have been advantageous to me to increase the cost basis instead.