What if short sales have an incorrect holding period on the Capital Gains report?
Due to the complex tax rules governing short sales, all short sales that result in capital gains are categorized as Short Term and all short sales that result in losses are categorized as Long Term.
This general rule is used because there is not enough information to assign a more accurate holding period. Overall, it is a conservative approach to reporting your short sale losses, and errors will over-report your tax liability rather than under-report it. Your short sale losses, however, may be reportable as short term.
We advise that you consult your tax advisor to best determine which holding period is correct for your short sales.