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bnabin51 OP t1_ja5gkx4 wrote

Reply to comment by chinnick967 in Tax offset on paid dividends by bnabin51

From what I have understood so far, if I shorted stock, I need to borrow the shares from someone else. The company pays dividends to the one who bought from me. However, I need to pay the person from whom I borrowed the shares, don't I?

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chinnick967 t1_ja5hcd9 wrote

If you received the dividend payment, that will go back to the whomever you borrowed the shares from. You do not need to pay anything extra to the lender of the shares.

That dividend payment will not be considered capital gains and you will not need to pay tax on it.

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bnabin51 OP t1_ja5hy0n wrote

Sorry if I explained it incorrectly. I did not receive a dividend. To receive a dividend, I need to be in a long position. However, I was in a short position.

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chinnick967 t1_ja5i11o wrote

If you did not receive a dividend on the borrowed shares, then you do not need to pay a dividend

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bnabin51 OP t1_ja5ic1p wrote

Then who pays the dividend to the stock lender?

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chinnick967 t1_ja5ihcu wrote

The company pays out the dividend payments to it's stock holders, including the person you are borrowing the shares from

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bnabin51 OP t1_ja5j3ik wrote

I don't think this sounds reasonable.

Suppose a company has a total of 1000 shares and I own all of them. If you borrowed them from me and sold them to Elon Musk. Does the company pay dividends to both me and Elon Musk?

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