Brokers charge short sellers “stock borrow fees” or “loan premiums.” Tax research indicates these payments are “fees for the temporary use of property.” Watch out: Many brokers refer to stock borrow fees as “interest expense,” which confuses short sellers.
For tax purposes, stock borrow fees are miscellaneous other deductions for investors on Schedule A line 28, and Section 162 business expenses for traders qualifying for trader tax status (TTS).
Stock borrow fees are not “interest expense” so investors can’t include them in “investment interest expense” deductions.
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