selling short stock actually owned by the seller but held in safekeeping at a brokerage firm, called the box in Wall Street jargon, which postpones recognition of the gain until the following year. The seller delivers borrowed stock and later repays the lender with the stock held in the box.
selling short stock actually owned by the seller but held in safekeeping, called the box in Wall Street jargon. The motive for the practice, which assumes that the securities needed to cover are borrowed as with any short sale, may be simply inaccessibility of the box or that the seller does not wish to disclose ownership. The main motive is to protect a capital gain in the shares that are owned, while deferring a long-term gain into another tax year. This technique was curtailed as a way to defer taxes by the taxpayer relief act of 1997. Under the law, shorting against the box after June 8, 1997 is considered a "constructive sale," resulting in capital gains liability.
