Stock Locate Fees

I

IceTea92

for those who trade through a LLC or partnership or anyone

are stock locate fees for hard to borrow shorts considered part of the cost basis and a capital loss OR is it considered a trading business expense to be deducted off income


any info on this is appreciated.
 
A lot of brokers won't itemize this and you just get a daily or monthly total borrow interest expense item. For these, I think the best option is to treat it as investment interest expense and either deduct it on Sch A (itemized) or Sch C (business expense) depending on if you meet the IRS definition of an active trader. When I looked into this at one point, I thought it perhaps should have been treated taxwise along the lines of short dividends paid (capitalized into the trade net PNL or deducted, depending on holding period), but that requires knowing the cost allocation on a stock-by-stock and day-by-day basis.
 
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