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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: Mike Buckley who wrote (3782)5/30/2002 11:09:29 AM
From: Thomas Tam  Read Replies (2) of 5205
 
Speaking of taxes, I will be moving to the U.S. in the next couple of months, and was wondering if the gains (hopefully) from writing calls (or any option transactions) open and closed less than one year is considered to be short term capital gains which would be taxed at the marginal rate? My thoughts are yes, but would like the thread's thoughts on this.

And could anyone validate my numbers on this theoretical SEBL transaction.

Have 1000 shares of SEBL, with say a net cost of .01, and you sell the stock for 24.01 for a net profit of 24000. If the gains are long term you would be taxed at 20% (I'm not totally polished on my U.S. capital gains tax numbers), you would have to pay 4800 in taxes and you would net out 19200.

Say SEBL sells off like it did recently, and you buy back a 1000 shares at $18.50 (like yesterday). Would the cost base change for the shares sold change? (This is a Canadian tax thing) For example, it would mean you would add the .01 and 18.50 and divide by 2, meaning your cost base is ~$9.25, and the capital gain is reduced to $14.75 per share. This would crystalize your gain and reduce the tax hit and allow you to still have the stock. Is this the way things work down there?

Thomas
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