Considerations
GainsKeeper has implemented short-to-long wash sale functionality including an approximation methodology related to the special short-to-long holding period rule of Reg. §1233(b)(1). Under this IRS imposed rule, some holding periods may be characterized as long-term.
If an investor has not held the stock (or substantially identical stock) identified in the short sale for more than 1-year on the date the short sale is entered into, then any gain on the short sale is short-term capital gain (even if property held for more than 1-year is used to close the short sale). The holding period on such stock (or substantially identical stock) that is held on the date the short sale is entered into or is acquired between such date and the date the short sale is closed shall begin on the date the short sale is closed (or it is disposed of).
If the investor has held the stock (or substantially identical stock) identified in the short sale for more than 1-year on the date the short sale is entered into, then any loss on the short sale is long-term capital loss (even if property held for less than 1-year is used to close the short sale).
Sec. 1233(b)(2) and 1233(d) holding period rules are NOT presently implemented because these rules affect a position other than the position disposed, requiring relationship matching which is not part of GainsKeeper engine.
GainsKeeper does not provide tax advice. Customers should consult their own tax advisers and they (and not GainsKeeper) are solely responsible for any tax, tax penalties or interest related to their tax returns. GainsKeeper is a tool to assist taxpayers but does not cover a variety of specific tax rules or taxpayer circumstances and facts. Taxpayers should consider a variety of special rules not addressed by GainsKeeper including but not limited to the constructive sale rule, whether securities, options and other financial instruments are substantially identical, and various aspects of the rules discussed that are not addressed by this new functionality as well as any change in tax accounting method considerations.