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Technology Stocks : Intel Corporation (INTC)

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To: NITT who wrote (173095)	2/17/2003 11:34:52 PM
From: tcmay	Read Replies (1) of 186894

"re:"But if I am paid, say, $5000 for an option I sell to Dorenda to buy my current house for $500,000, then that is _income_ to me. And an _expense_ to Dorenda. And if Dorenda's employer buys that option for _her_, then he has given her a $5000 gift/bonus. And thus the tax code already takes care of how these things are handled" "I believe that the in your scenario, that if it is truly an option (the buyer does not have to purchase the property), then the $5000 does not become subject to income taxes until the option is either exercised or it expires. Not sure what this does to your concept. " Covered calls work in precisely the way I have described: those holding something sell options to buy some or all of that something. I will have to check the tax code, but I believe the income from a covered call is reportable for the tax year in which the income was realized, not a year or two years later when the covered call expires worthless (if it does). But I could be wrong. In either case, both of our scenarios are still describing a case where options are expensed by the issuer/seller, either at the time of granting or when the option is exercised. --Tim May

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