Editing Short (finance) (section)

=== Against the box ===
One variant of selling short involves a long position. "Selling short against the box" consists of holding a long position on which the shares have already risen, whereupon one then enters a short sell order for an equal number of shares. The term ''box'' alludes to the days when a [[safe deposit box]] was used to store (long) shares.  The purpose of this technique is to lock in paper profits on the long position without having to sell that position (and possibly incur taxes if said position has appreciated). Once the short position has been entered, it serves to balance the long position taken earlier. Thus, from that point in time, the profit is locked in (less brokerage fees and short financing costs), regardless of further fluctuations in the underlying share price. For example, one can ensure a profit in this way, while delaying sale until the subsequent tax year.

U.S. investors considering entering into a "short against the box" transaction should be aware of the tax consequences of this transaction.  Unless certain conditions are met, the IRS deems a "short against the box" position to be a "constructive sale" of the long position, which is a taxable event.  These conditions include a requirement that the short position be closed out within 30 days of the end of the year and that the investor must hold their long position, without entering into any hedging strategies, for a minimum of 60 days after the short position has been closed.<ref>{{cite web |url=https://www.irs.gov/publications/p550/ch04.html#d0e8793 |title=United States IRS Publication 550 Investment Income and Expenses |publisher=Internal Revenue Service |access-date=24 May 2012 |archive-date=26 October 2018 |archive-url=https://web.archive.org/web/20181026064513/https://www.law.cornell.edu/uscode/text/26/1221#d0e8793 |url-status=live }}</ref>