Short Sales - Open at Year-End

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If a taxpayer is able to defer the gain or loss until the year a short sale closes, taking the following steps will allow for the reconciliation of the taxpayer's Form 1099-B and Schedule D without recognition of gain or loss from the short sale:

1. On Schedule D, report gross proceeds as shown on Form 1099-B (lines 3 and 10, column (b) of Schedule D should equal the total gross proceeds reported on all Forms 1099-B).

2. On Schedule D, column (b) and (c), write "Short-sale".

3. On Schedule D, column (f), write "See attached statements".

4. In the attached statements, explain the details of the short sale and that it is not closed at the end of the year. Include the taxpayer's name and social security number as it appears on the return.

See IRS Publication 550 for more information on reporting short sales.

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