Sale Against the Box Law and Legal Definition

Sale against the box is a type of short sale that takes place when a tax payer owns substantially identical shares. It occurs when a shareholder owns a particular stock and enters into a short sale with respect to borrowed shares of the same stock. It is a sale by the holder of a long position in the same stock. The method creates a neutral position when share prices decline. Gains from the short sale and the loss from the decline are offset. Instead of selling long position one can sell the stock short, with gains offsetting losses. As there is no actual sale, tax need not be paid in short sale. The term box refers to the older practice of placing shares held long term in a safely deposit box.