How do I enter a short cover?

Forum|Forum|4 years ago
April 28, 2022
1 reply
12 views

Folks:

My client has a series of short cover transactions on his 1099-B. For most of them, the cost and proceeds data looks normal: Cost of $5,000, proceeds of $6,000. I assumed that these were entered in Lacerte just like any other stock transaction. But one of the transactions shows proceeds of $6,000 but a cost of $70,000! I have not yet asked the client if that is correct, which I will do, but in the meantime this got me worrying that I was not entering the transaction correctly in Lacerte. Is there anything special to be done with it?

Thanks.

Micah

Lacerte Tax

This topic has been closed for replies.

George4Tacks

Level 15

Talk with the client.

https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home/stocks-options-splits-traders/stocks-options-splits-traders-6

Answers are easy. Questions are hard!

joshuabarksatlcs

Level 9

RE: But one of the transactions shows proceeds of $6,000 but a cost of $70,000!

Example: If you shorted 1,000 shares of GameStop Corp (GME) at $5 on around 7/1/2020, and covered on 3/1/2021, you could need $189,000 to cover. If you covered today, the bill would still be around $125,000. Based on GME's financials, using the traditional pricing models, shorting at $5 might not even be that bad an idea at that time.

Yes, as @George4Tacks suggested, ask the client - and brace for his/her pain, that is, unless the 1099-B was wrong. A suggestion: ask while the spouse is NOT there.

Actually if you identify the stock in issue, you may have a clue.

I come here for kudos and IRonMaN's jokes.

George4Tacks

Level 15

I once had a client (retired) that decided to trade in gold futures.

1st year - loss of $75K. I cringed a bit. He said - But it will recover!

2nd year - loss of $125K. A certain body part clinched a bit. He said - But it will recover!

3rd year - loss of $150K. I asked if he knew what a gambling addiction was and he responded with a description. I then said "Think about it."

He called the next day and thanked me for the thought I had passed on to him.

I never saw or heard from him again.

Answers are easy. Questions are hard!

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