Constructive sale
Certified Financial Planner glossary · Certified Financial Planner
Definition
A transaction under Section 1259 that so completely offsets an appreciated position that gain is deemed realized.
Constructive sale in plain English
A client shorts against the box on a hugely appreciated stock and claims nothing is taxable yet. Section 1259 may treat that offset as a constructive sale: a transaction that so completely hedges an appreciated position that gain is deemed realized. Partial hedges may escape; near-perfect offsets often do not. Separately, wash-sale rules police losses, not this gain-forcing rule. Ask whether the appreciated long position was effectively eliminated.
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