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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Mathemagician who wrote (41308)4/2/2001 10:58:08 AM
From: BDR  Read Replies (1) of 54805
 
Selling deep in the money calls would defer your gain but may not convert it to a long term gain. This was discussed on the Covered Call thread a few months ago:
Message 15226461
and responses.

I believe the IRS views selling deep ITM calls as resulting in a "substantial reduction of risk of loss" and considers the holding period for the stock to end the day you put the covered call in place. In other words, your short term gain in August will still be a short term gain for tax purposes in January when you get called away, albeit it is now reported in the next tax year. But check with your tax advisor.

Someone else also pointed out that the IRS would not be likely to catch you if you reported the gain as a long term gain unless you were audited. Personally, I don't like playing Russian roulette with the IRS. I don't want to give the government any excuse to intrude further into my life than it already does.
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