Capital Gains and Losses - Short Sale Dividends Paid Payments in Lieu of Dividends
1
If, while holding a short sale, a dividend was issued which ultimately came from your brokerage account, the amount may be able to be deductible as an investment expense on Federal Schedule A (Form 1040).
If the payment you had to make to the lender, in lieu of dividends distributed on stock borrowed for a short sale, qualifies as an investment expense, enter this amount in TaxAct by following the steps below.
Note: This deduction is only allowed if the short sale remained open for more than 45 days (or more than 90 days for preferred stock). Payments made while the position is held for a shorter period must instead be added to the basis of the stock used to close the short sale.
See IRS Publication 550 for details. Use Form 4952 to figure your deduction for investment interest, unless an exception applies.
Online
Dashboard
From within your TaxAct return, click Deductions & Credits.
On smaller devices, click the menu at the top left corner of your screen, then make your selection.
Click the Retirement & Investments drop-down.
Click Add beside Investment Interest Expenses.
Enter the amount of Investment interest expense from other sources.
Classic
From within your TaxAct return, click Federal.
On smaller devices, click the menu at the top left corner of your screen, then make your selection.
Click the Itemized Deductions drop-down, then click All itemized deductions topics.
Click Review next to Investment Interest.
Enter the amount of Investment interest expense from other sources.
Desktop
From within your TaxAct return, click Federal.
Click the Itemized Deductions drop-down, then click All itemized deductions topics.
Follow the interview until you see the question Did you have any investment interest to report? Click Yes.
Enter the amount of Investment interest expense from other sources.
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