I didn’t realize this, but it doesn’t matter how long you’ve held a stock for…if you sell a stock short, then it will always be taxed as a short term capital gain.
I thought Ameritrade had made a mistake at first, but then I did some researching, and it looks like it’s true. Also, if there is a dividend, you’ll have to pay the dividend to the person who you borrowed the stock from. Usually, it’ll be noted as “payment in lieu of dividend” in your account history.
I remember a few years ago, I shorted 900 shares of this stock PD. I ended up paying almost $2,000 in dividends because it announced a $2 dividend or something close to that number. I didn’t know why the hell Interactive Brokers took $2k from my account until I realized that PD had a dividend payment.
