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Technology Stocks : Intel Corporation (INTC)
INTC 46.96-2.8%Jan 16 9:30 AM EST
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To: tcmay who wrote (173186)2/26/2003 1:31:55 PM
From: miraje  Read Replies (2) of 186894
 
Tim,

Other issues which complicate the analysis are the tax status of those selling CCs. Is generating ordinary income on a CC writing better than taking the capital gain?

As far as I know, profits from CC writing are taxed as capital gains, not as income. And if you write LEAP CC's, they are taxed as long term gains (20% max), if the expiration is more than a year out and you hold the position for at least that duration.

But I wouldn't want my holdings taken away at $20 and thus incur the full cap. gains burden. (Nor would I want to have to buy back the options to stop the sale from going to completion.)

You can always roll them (CC's) to a higher strike at a later date. That may also generate a capital loss (for tax purposes) while protecting and even enhancing unrealized future gains.

Regards, JB
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