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  • pagan942 pagan942 Sep 12, 2007 4:44 PM Flag

    Shorts & Spec Div'd

    "Yes. So why would anybody let their stock be loaned out, where there is a large dividend, and lose their special tax rate ?

    I am not sure you are correct in this tax thing, you must be missing something. I assume you could open and margin account and hold no securities, only use it for shorting.

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    • If you buy stock on margin the broker holds your stock as collateral and can loan your stock out. But if you own it free and clear you don't have to leave it in the account.

      With respect to the "tax thing" go to and look at Form 1099 MISC, box 8. When your stock is loaned out, and you receive "payments in lieu of dividends", this is the form the brokers are required to give you. These payments are required to be reported as "other income" on your tax return. Not as dividend income. You don't get a Form 1099 DIV.