Question on how you determine which shares are sold (for cost basis) when you do a partial sale.
I've sold some covered calls, and the trade has gone against me. The calls are in the money, and likely to stay that way.
I don't want to sell the long position as it has a low cost basis, and selling it will bring a big tax bill.
How about if the day of expiration if I buy the regular shares which correspond to the amount of contracts of in the money calls, and then when the calls expire in the money and the shares get called away from me, can I declare that the sold shares are exactly the newly purchased shares (with high cost basis) and not the long term low cost shares?
For example, lets say I own 1,000 shares of stock XYZ with cost basis $5. XYZ's current price is $70.
I have sold 100 XYZ $65 call contract that expire in two weeks. I think they will expire in the money.
Lets say I buy a second lot of 1,000 shares of XYZ for $70 per share. I now have 2,000 shares of XYZ, 1,000 newly purchased shares with cost basis $70 and 1,000 long term hold shares with cost basis $5.
When the covered $65 calls expire in the money, and I must sell 1,000 shares of XYZ at $65, can I report on my taxes that I sold the new shares with cost basis $70 rather than my long term hold shares with cost basis $5?
Can you choose which shares you sell when you sell a partial lot? |
