With the market as it is, many of you might decided to include shorting in your investment strategy. It’s quite possible that one of the companies that you shorted was one that pays a cash dividend. Since you are likely borrowing the shares that you initially sold to create your short position, you are required to reimburse the lender of the stock for the dividends that he missed. Your broker probably notified you of that fact, and reduced your cash position in your account by the amount of the dividend.

Just follow the step-by-step wizard to generate your Dividend Paid on Short Sales record

With such a function, Trademax make it easy to better adjust the cost basis of the stock by that amount.

  1. Select the record to which you want to make your Div Paid on ShortSales.l
  2. Right-click on the selected record and select the Event Append in the context menu, then choose Div paid on ShortSales in the dropdown list:
  3. A dialog box will pop up:
  4. Function
    1. Enter Transaction

    There are two options in the dropdown list:  Return of Capital and Div Paid on ShortSales. The default type depends on your choice in the previous step.

    2.Transaction Date The payment date is when the company expects the dividend  payment process to be completed. You can manually enter the date or choose from the dropdown calendar to set the Transaction Date.
    3. Event Date The recorded date when the company initiates the dividend payments to its shareholders of record. You can manually enter the date or choose from the dropdown calendar to set the Event Date.
    4.Account The account name to which the specific security belongs. Choose the specific account name from the accounts list.
    5.Security Name The name of the specific security
    6.Amount Manually enter the quantity of the capital
    The description of the security is displayed automatically
  5. After checking the information, click on the OK button to continue the process. You will see the following grid:
  6. As you can see from the above picture, the new record is generated automatically.

  7. You can cancel this action with the Undo Button in the trade tab.

Supplemental Instructions : Let’s say you short 1000 shares of ABC Company on March. 1 at $10 a share. On Mar. 16th, your broker notifies you that your account will be reduced by $50 for the dividend paid by ABC Company to its shareholders. On April 10, you close your short position by buying 1000 shares of ABC at $8 a share. Since the short position was not open for at least 46 days, you cannot use the $50 in-lieu-of-dividend payment as a current expense. Rather, this $50 is added to the price of the stock that you purchased to close the position. In the example above, your net gain on your short position would be $150 ($1,0000-($8000+$50)=$150).

Let’s use the same example, but change the dates. Let’s say that you don’t close the short position until May 15. In this case, the in-lieu payment of $50 would be treated as investment interest, which is deductible on Schedule A (assuming that you itemize your deductions), and your gain on the closing of the short position would be $200.