Short Sales

A short sale is a contract to sell property you borrowed for delivery to a buyer. At a later date, you either buy substantially identical property and deliver it to the lender or deliver property that you held but didn’t want to transfer at the time of the sale.

Example.

You think the value of XYZ stock will drop. You borrow 10 shares from your broker and sell them for $100. This is a short sale. You later buy 10 shares for $80 and deliver them to your broker to close the short sale. Your gain is $20 ($100 − $80).

Holding period.

Usually, your holding period is the amount of time you actually held the property eventually delivered to the broker or lender to close the short sale. However, your gain when closing a short sale is short term if you (a) held substantially identical property for 1 year or less on the date of the short sale, or (b) acquired property substantially identical to the property sold short after the short sale but on or before the date you close the short sale. If you held substantially identical property for more than 1 year on the date of a short sale, any loss realized on the short sale is a long-term capital loss, even if the property used to close the short sale was held 1 year or less.

Reporting a short sale.

Report any short sale on Form 8949 in the year it closes.

If a short sale closed in 2025 but you didn’t get a 2025 Form 1099-B or Form 1099-DA (or substitute statement) for it because you entered into it before 2011, report it on Form 8949 in Part I with box C or box I checked or Part II with box F or box L checked (whichever applies). In column (a), enter (for example) “100 sh. XYZ Co.—2010 short sale closed.” Fill in the other columns according to their instructions. Report the short sale the same way if you received a 2025 Form 1099-B or Form 1099-DA (or substitute statement) that doesn’t show proceeds (sales price).