melinda-re: options & income tax (individual returns)
What are the tax implications on that sort of a trade
irs.ustreas.gov
""HOLDERS of calls and puts:
If you buy a call or a put, you may not deduct its cost. It is a capital expenditure.
If you sell the call or the put before you exercise it, the difference between its cost and the amount you receive for it is either a long-term or short-term capital gain or loss, depending on how long you held it.
If the option expires, its cost is either a long-term or short-term capital loss, depending on your holding period, which ends on the expiration date.
If you exercise a call, add its cost to the basis of the stock you bought. If you exercise a put, reduce your amount realized on the sale of the underlying stock by the cost of the put when figuring your gain or loss. Any gain or loss on the sale of the underlying stock is long term or short term depending on your holding period for the underlying stock.
Short sale
Buying a put option is generally treated as a short sale, and the exercise, sale, or expiration of the put is a closing of the short sale. See Short Sales, earlier. If you have held the underlying stock for 1 year or less at the time you buy the put, any gain on the exercise, sale, or expiration of the put is a short-term capital gain. The same is true if you buy the underlying stock after you buy the put but before its exercise, sale, or expiration. Your holding period for the underlying stock begins on the earliest of:
The date you dispose of the stock,
The date you exercise the put,
The date you sell the put, OR
The date the put expires.
WRITERS of calls and puts:
If you write (grant) a call or a put, do not include the amount you receive for writing it in your income at the time of receipt. Carry it in a deferred account until:
Your obligation expires,
You sell, in the case of a call, or buy, in the case of a put, the underlying stock when the option is exercised, or
You engage in a closing transaction.
If your obligation expires, the amount you received for writing the call or put is short-term capital gain.
If a call you write is exercised and you sell the underlying stock, increase your amount realized on the sale of the stock by the amount you received for the call when figuring your gain or loss. The gain or loss is long term or short term depending on your holding period of the stock.
If a put you write is exercised and you buy the underlying stock, decrease your basis in the stock by the amount you received for the put. Your holding period for the stock begins on the date you buy it, not on the date you wrote the put.
If you enter into a closing transaction by paying an amount equal to the value of the call or put at the time of the payment, the difference between the amount you pay and the amount you receive for the call or put is a short-term capital gain or loss.""
irs.ustreas.gov
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Comprehensive Information for Individual Income Tax Returns:
Please consider the information in the IRS publications to be the authoritative source.
Sales and Trades of Investment Property:
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cboe.com
Investment Expenses:
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General References (Fed. & States):
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Tax Calendars for 2000:
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Tax Withholding and Estimated Tax:
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Taxable & Nontaxable Income:
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Charitable Contributions:
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Basis of Assets:
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Miscellaneous Deductions:
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Business Expenses:
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Individual Retirement Arrangements (Regular, Roth & Education IRAs):
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Travel, Entertainment, Gift, and Car Expenses:
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Records:
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Taxpayer Rights:
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