You obviously don't know Chanos and his recently purchased US Congressman Richard Baker that he hired away mid-term as the Chairmam of the House Financial Services Committee on Capital Markets to lobby for hedge-fund swine. Chanos also kept also housed a high-price whore that serviced Eliot Spitzer.
Google him. While you're at hit, google Stephen Cohen, Marc Cohodes and David Rocker as well and see deepcapture.com
Gains from a short sale are due when a stock becomes worthless, cover or not, and are always ST gains regardles of holding period.
It doesn't matter what the law says. Billion dollar hedge funds are above the law. That's why John Mack is walking around free instead of doing time for insider trading and Gary Aguirre was fired from the SEC.
Shorting with no intention of delivering the shares from T+3 is already illegal under the 1934 Securities act.
If I short a put or a call and the put expires worthless, I never cover, right? Think the IRS will let get away with collecting the premium tax free?
Not the same. The bankrupt companies usually end up on the pink sheets and trade OTC as penny stocks, which the hedge funds continue to report as a short position and don't pay tax on.
That's one of the sources of the huge systemic risk. If the SEC required all of the naked-shorts to cover, there isn't enough money remaining in the system to cover all of the naked short shares at even pennies on the dollars. It's all been used to buy mansions in the hamptons, private jets, porsches, high-priced whores, and government officials.
You think hedge funds follow the law and don't cheat the IRS? Google UBS and see why they're in so much trouble. Not only does UBS break the law, but they have the audacity to help other rich Americans hide income from the IRS.
So it's your allegation that everyone involved in the hedge fund industry is a crook?
I didn't know they made idiots that big.