What Is the "Constructive Sale" Rule and How Might It Affect Options? ⎊ Path

What Is the “Constructive Sale” Rule and How Might It Affect Options?

The constructive sale rule prevents a taxpayer from locking in a gain on an appreciated position while deferring tax by entering into an offsetting position. Entering into certain option strategies, such as a short sale against the box or a collar, can be deemed a "constructive sale," forcing the recognition of the gain in the current tax year.

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