Tax question

[jeb9999]

What you are missing is that the short seller OWES the dividend to the person he borrowed the stock from because the person he sold the borrowed stock to is the person that collects the dividend from the company.

The payment from the short seller to the person he borrowed the stock from is know as "payments in lieu of dividends". All the ugly details are explained in IRS Notice 2003-67 The Jobs and Growth Tax Relief Reconciliation Act of 2003—Information Reporting for Payments in Lieu of Dividends.

 

[jeb9999]

vjay, my explantion was to piezoe. Your explantion to piezoe is correct and you beat me by 2 minutes.

 

[vjay]

jeb,
As an aside, It's amazing how the genius's at the IRS can figure so many ways to nickel and dime everyone and Congress will
shoot billions down the drain. Maybe we should put the IRS in charge of the budget

 

[piezoe]

Thanks Vjay and Jeb. It's very clear now. And i was missing a brain, and that third party the short sold to. Thanks.