Dividends I Paid Out On A Stock That I Have Sold Short

Depending on the details, as investment interest or added basis when you cover the short. See "payments in lieu of dividends" in IRS Pub 550.

-- Phil Marti Clarksburg, MD

I am reasonably certain that "short dividends" are reported as investment interest expense.

-- Bruce E. Cobern, CPA mailto: snipped-for-privacy@pipeline.com

According to IRS Pub 550:

• If the short position is open for more than 45 days, you deduct the "short dividend" as investment interest on Sched A.
• If the position is open for 45 days or less, you have to increase your basis in the short position by the amount of the "short dividend". You can't deduct it.

-- Rich Carreiro snipped-for-privacy@animato.arlington.ma.us

Does the 45 days mean the total time the position is open, or does the 45 days mean the from the time I went short until the time the dividend was paid out by me?