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Replies to post #4396 on Ariad Pharmaceuticals Inc fka ARIA
BTH's "analysis" that today was the last day for short covering, was incorrect
Settlement date
Stock market trades generally settle a few days after the trade date. This is the day shares and cash actually change hands. But the settlement date doesn't matter for purposes of determining when your sale took place. If your trade date is in the current year and your settlement date is in the following year, the tax law says you made the sale in the current year (year of the trade date).
Different rule for short sales
If you're closing a short sale, any loss you have on the closing transaction is treated as if it occurs on the settlement date, not the trade date. That's because delivery is generally the event that closes a short sale. If you need to report a loss from a short sale in the current year, be sure to act early enough so the transaction settles by December 31.
What about gains from short sales? A June 2002 ruling from the IRS says the constructive sale rule applies when you close a short sale at a gain. That's because for the few days between the trade date (when you're treated as having bought the replacement shares) and the settlement date (when your short sale is actually closed) you're long and short the same stock. That means you have to report gains from short sales on the trade date, not the settlement date.
