The exception in the IRS Publication does not include the full statute citation. The Internal Revenue Code section that relates to payments in lieu of dividends in connection with short sales begins at IRC 263(h). The exception you included in your post which comes from IRS Publication 550 is taken, in part, from IRC 263(h)(5)(A) which, in full, states the following:
(5) Deduction allowable to extent of ordinary income from amounts paid by lending broker for use of collateral
(A) In general Paragraph (1) shall apply only to the extent that the payments or distributions with respect to any short sale exceed the amount which—
(i) is treated as ordinary income by the taxpayer, and
(ii) is received by the taxpayer as compensation for the use of any collateral with respect to any stock used in such short sale.
Thus, the exception relates to conduct by the lending broker. And yes, if you closed the short sale prior to the expiration of the 45th day, you can increase your basis by the dividend amount.
@ip53
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