Capital Loss on a covered call position

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Subject Author Date Capital Loss on a covered call position nickra 06-12-2007  Re: Capital Loss on a covered call position Arthur Kamlet 06-18-2007  Re: Capital Loss on a covered call position Seth 06-18-2007  Re: Capital Loss on a covered call position Arthur Kamlet 06-19-2007  Re: Capital Loss on a covered call position Seth 06-19-2007  Re: Capital Loss on a covered call position Ron Peterson 06-19-2007
Posted by nickra on June 12, 2007, 1:06 am Please log in for more thread options Say I own 1,000 of XYZ and have for a decade or so ago. Big capital gain, even withthe lower rate. Now, say I write some ATM calls, 10, for 1 each let's say they expire in three months, same tax year. My stock goes from 100 to 105 by day of expiration. Instead of letting the stock get called away, I buy the options back for 5. Now that is a loss (offset by the gain in my stock, yes.) So, do I take a loss on buying the options back? Any effect on the tax status of the stock I own? << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Arthur Kamlet on June 18, 2007, 9:27 am Please log in for more thread options > Say I own 1,000 of XYZ and have for a decade or so ago. Big > capital gain, even withthe lower rate. Now, say I write some > ATM calls, 10, for 1 each let's say they expire in three > months, same tax year. My stock goes from 100 to 105 by day > of expiration. Instead of letting the stock get called away, > I buy the options back for 5. Now that is a loss (offset by > the gain in my stock, yes.) So, do I take a loss on buying > the options back? Any effect on the tax status of the stock > I own? You wrote some covered calls and bought them back to close out the position at a loss. Yes, that's a loss. Report it as short term loss on schedule D. -- ArtKamlet at a o l dot c o m Columbus OH K2PZH << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2006) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Seth on June 18, 2007, 9:27 am Please log in for more thread options > Say I own 1,000 of XYZ and have for a decade or so ago. Big > capital gain, even withthe lower rate. Now, say I write some > ATM calls, 10, for 1 each let's say they expire in three > months, same tax year. My stock goes from 100 to 105 by day > of expiration. Instead of letting the stock get called away, > I buy the options back for 5. Now that is a loss (offset by > the gain in my stock, yes.) So, do I take a loss on buying > the options back? Yes; unless you have other capital gains, only $3,000 of your $4,000 capital loss is deductible against ordinary income this year, the rest carries forward. > Any effect on the tax status of the stock > I own? No; you bought and sold (not in that order) a different instrument entirely. Seth << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2006) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Arthur Kamlet on June 19, 2007, 9:29 pm Please log in for more thread options > Say I own 1,000 of XYZ and have for a decade or so ago. Big > capital gain, even withthe lower rate. Now, say I write some > ATM calls, 10, for 1 each let's say they expire in three > months, same tax year. My stock goes from 100 to 105 by day > of expiration. Instead of letting the stock get called away, > I buy the options back for 5. Now that is a loss (offset by > the gain in my stock, yes.) So, do I take a loss on buying > the options back? Any effect on the tax status of the stock > I own? You wrote some covered calls and bought them back to close out the position at a loss. Yes, that's a loss. Report it as short term loss on schedule D. -- ArtKamlet at a o l dot c o m Columbus OH K2PZH << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2006) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Seth on June 19, 2007, 9:29 pm Please log in for more thread options > Say I own 1,000 of XYZ and have for a decade or so ago. Big > capital gain, even withthe lower rate. Now, say I write some > ATM calls, 10, for 1 each let's say they expire in three > months, same tax year. My stock goes from 100 to 105 by day > of expiration. Instead of letting the stock get called away, > I buy the options back for 5. Now that is a loss (offset by > the gain in my stock, yes.) So, do I take a loss on buying > the options back? Yes; unless you have other capital gains, only $3,000 of your $4,000 capital loss is deductible against ordinary income this year, the rest carries forward. > Any effect on the tax status of the stock > I own? No; you bought and sold (not in that order) a different instrument entirely. Seth << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2006) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted Covered Equity Call Option Reporting? February 23, 2009, 6:26 pm Capital loss? ? ? January 23, 2009, 12:57 pm capital loss carryovers May 11, 2007, 5:49 pm Can I "buy" capital loss carryover? June 19, 2007, 9:29 pm Capital Loss Carryovers January 6, 2009, 11:26 pm Decendent's capital loss January 12, 2009, 4:41 pm What constitutes a capital loss? 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