For purposes of this subtitle, gain or loss from the short sale of property shall be considered as gain or loss from the sale or exchange of a capital asset to the extent that the property, including a commodity future, used to close the short sale constitutes a capital asset in the hands of the taxpayer.
If gain or loss from a short sale is considered as gain or loss from the sale or exchange of a capital asset under subsection (a) and if on the date of such short sale substantially identical property has been held by the taxpayer for not more than 1 year (determined without regard to the effect, under paragraph (2) of this subsection, of such short sale on the holding period), or if substantially identical property is acquired by the taxpayer after such short sale and on or before the date of the closing thereof-
For purposes of this subsection, the acquisition of an option to sell property at a fixed price shall be considered as a short sale, and the exercise or failure to exercise such option shall be considered as a closing of such short sale.
Subsection (b) shall not include an option to sell property at a fixed price acquired on the same day on which the property identified as intended to be used in exercising such option is acquired and which, if exercised, is exercised through the sale of the property so identified. If the option is not exercised, the cost of the option shall be added to the basis of the property with which the option is identified. This subsection shall apply only to options acquired after August 16, 1954.
If on the date of such short sale substantially identical property has been held by the taxpayer for more than 1 year, any loss on the closing of such short sale shall be considered as a loss on the sale or exchange of a capital asset held for more than 1 year (notwithstanding the period of time any property used to close such short sale has been held, and notwithstanding section 1234).
subsection (b)(2) shall apply in respect of the holding period of such substantially identical property.
In the case of a short sale which had been entered into as an arbitrage operation, to which sale the rule of subsection (b)(2) would apply except as otherwise provided in this subsection-
This section shall not apply in the case of a hedging transaction in commodity futures.
If-
the taxpayer shall recognize gain in the same manner as if the short sale were closed when the property becomes substantially worthless. To the extent provided in regulations prescribed by the Secretary, the preceding sentence also shall apply with respect to any option with respect to property, any offsetting notional principal contract with respect to property, any futures or forward contract to deliver any property, and any other similar transaction.
If property becomes substantially worthless during a taxable year and any short sale of such property remains open at the time such property becomes substantially worthless, then-
26 U.S.C. § 1233
EDITORIAL NOTES
AMENDMENTS2002-Subsec. (e)(2)(E). Pub. L. 107-147 added subpar. (E).2000-Subsec. (e)(2)(D). Pub. L. 106-554 added subpar. (D).1997-Subsec. (h). Pub. L. 105-34 added subsec. (h).1984-Subsecs. (b), (d), (e)(4)(A)(i). Pub. L. 98-369 substituted "6 months" for "1 year" wherever appearing, applicable to property acquired after June 22, 1984, and before Jan. 1, 1988. See Effective Date of 1984 Amendment note below. 1981-Subsec. (e)(2)(A). Pub. L. 97-34 inserted ", but does not include any position to which section 1092(b) applies" after "taxpayer".1976-Subsec. (b). Pub. L. 94-455, §1402(b)(2), provided that "9 months" would be changed to "1 year".Pub. L. 94-455, §1402(b)(1)(T), (2), provided that "6 months" would be changed to "9 months" for taxable years beginning in 1977.Subsec. (c). Pub. L. 94-455, §1901(a)(137), substituted "August 16, 1954" for "the date of enactment of this title".Subsecs. (d), (e)(4)(A)(i). Pub. L. 94-455, §1402(b)(2), provided that "9 months" would be changed to "1 year".Pub. L. 94-455, §1402(b)(1)(T), provided that "6 months" would be changed to "9 months" for taxable years beginning in 1977.1958-Subsec. (a). Pub. L. 85-866, §52(b), struck out ", other than a hedging transaction in commodity futures," after "sale of property".Subsec. (e)(4). Pub. L. 85-866, §52(a), added par. (4).Subsec. (g). Pub. L. 85-866, §52(b), added subsec. (g). 1955-Subsec. (f). Act Aug. 12, 1955, added subsec. (f).
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 2002 AMENDMENT Amendment by Pub. L. 107-147 effective as if included in the provisions of the Community Renewal Tax Relief Act of 2000 [H.R. 5662, as enacted by Pub. L. 106-554], to which such amendment relates, see section 412(e) of Pub. L. 107-147, set out as a note under section 151 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT Pub. L. 105-34, §1003(b)(2), Aug. 5, 1997, 111 Stat. 910, provided that: "The amendment made by paragraph (1) [amending this section] shall apply to property which becomes substantially worthless after the date of the enactment of this Act [Aug. 5, 1997]."
EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-369 applicable to property acquired after June 22, 1984, and before Jan. 1, 1988, see section 1001(e) of Pub. L. 98-369, set out as a note under section 166 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT Amendment by Pub. L. 97-34 applicable to property acquired and positions established by the taxpayer after June 23, 1981, in taxable years ending after such date, and applicable when so elected with respect to property held on June 23, 1981, see section 508 of Pub. L. 97-34, set out as an Effective Date note under section 1092 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT Pub. L. 94-455, title XIV, §1402(b)(1), Oct. 4, 1976, 90 Stat. 1731, provided that the amendment made by that section is effective with respect to taxable years beginning in 1977.Pub. L. 94-455, title XIV, §1402(b)(2), Oct. 4, 1976, 90 Stat. 1732, provided that the amendment made by that section is effective with respect to taxable years beginning after Dec. 31, 1977.Amendment by section 1901(a)(137) of Pub. L. 94-455 applicable with respect to taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as a note under section 2 of this title.
EFFECTIVE DATE OF 1958 AMENDMENT Amendment by section 52(b) of Pub. L. 85-866 applicable to taxable years beginning after Dec. 31, 1953, and ending after Aug. 16, 1954, see section 1(c)(1) of Pub. L. 85-866, set out as a note under section 165 of this title.Pub. L. 85-866, title I, §52(c), Sept. 2, 1958, 72 Stat. 1644, provided that: "The amendment made by subsection (a) [amending this section] shall apply with respect to short sales made after December 31, 1957."
EFFECTIVE DATE OF 1955 AMENDMENT Act Aug. 12, 1955, ch. 871, §2, 69 Stat. 718, provided that: "The amendment made by the first section of this Act [amending this section] shall apply only with respect to taxable years ending after the date of the enactment of this Act [Aug. 12, 1955] and only in the case of a short sale of property made by the taxpayer after such date."
- Secretary
- The term "Secretary" means the Secretary of the Treasury or his delegate.
- corporation
- The term "corporation" includes associations, joint-stock companies, and insurance companies.
- stock
- The term "stock" includes shares in an association, joint-stock company, or insurance company.
- taxable year
- The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A. "Taxable year" means, in the case of a return made for a fractional part of a year under the provisions of subtitle A or under regulations prescribed by the Secretary, the period for which such return is made.
- taxpayer
- The term "taxpayer" means any person subject to any internal revenue tax.
- transaction
- The term "transaction" includes a series of transactions.