Short Sale Borrowing Fees

[Mike9241]

from 2021 instructions for line 16

Other Itemized Deductions
List the type and amount of each expense
from the following list next to
line 16 and enter the total of these expenses
on line 16. I
Only the expenses listed next can be deducted on line 16. For more information about each of these expenses, see Pub. 529.

• Gambling losses (gambling losses
include, but aren't limited to, the cost of
non-winning bingo, lottery, and raffle
tickets), but only to the extent of gambling
winnings reported on Schedule 1
(Form 1040), line 8b.
• Casualty and theft losses of income-
producing property from Form
4684, lines 32 and 38b, or Form 4797,
line 18a.
• Federal estate tax on income in respect
of a decedent.
• A deduction for amortizable bond
premium (for example, a deduction allowed
for a bond premium carryforward
or a deduction for amortizable bond premium
on bonds acquired before October
23, 1986).
• An ordinary loss attributable to a
contingent payment debt instrument or
an inflation-indexed debt instrument (for
example, a Treasury Inflation-Protected
Security).
• Deduction for repayment of
amounts under a claim of right if over
$3,000. See Pub. 525 for details.
• Certain unrecovered investment in
a pension.
• Impairment-related work expenses
of a disabled person.

[reserve_currency]

Here's my reply in another thread.  I'm also trying to get clarification on this.

Why isn't a short borrow fee considered a cost, like a commission that a broker charges to buy/sell a stock? IRS says cost basis is any cost incurred in the transaction of the the asset.  The IRS would then get their money by taxing the fees that the broker made.

So wouldn't you adjust your cost basis to include the borrow fee and then include Form 8949 to show why you adjusted the cost basis of the stock?

[DaveF1006]

Yes, a borrow fee should be should be a cost that should be added to the cost basis of the stock. To report this correctly:

• Go to the stock sales portion of your return.
• After the information is added, there is a screen that says "Let us know if any of these Situations Apply to this Sale"
• Here you will check, I paid sales Expenses that aren't included in the Sales Proceeds reported on the form.
• There will be a drop down where you will enter the broker fees.
• once this done, there will be an entry that will automatically populate in your 8949 with a code adjustment E. i have included a screenshot that illustrates what this should look like on your 8949.