Investments & Financial Planning

What is Short Against the Box as it relates to securities ?

The expression Short Against the Box is a situation in which a taxpayer is both long and short owner in the same security, at the same time in his or her poertfolio account. It is a practice usually employed to defer tax liability on capital gains. Although the customer sells the stock short, he or she actually owns the security, which is held in the broker's "box." The aim is to protect a capital gain in owned shares, while deferring the taxes due if the shares were actually sold and the capital gain reported. This way, the investor can wait until he or she is in a more favorable tax situation to sell the securities.

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