I'm wondering whom at the IRS your accountant called and why your accountant would have expected an accurate answer on a subject this obscure.
Here is a quote from a copyrighted tax summary prepared by Ernst & Young for the major options exchanges:
"Mark-to-market" and "60/40" (i.e., 60 percent long-term, 40 percent short-term) treatment applies to broad-based U.S. stock index options (such as the S&P 100 Index option, the NYSE Composite Index® option and the Dow Jones Industrial Average option at CBOE, the Major Market Index option at Amex, the Wilshire Small Cap Index option at PSE, and the Value Line Composite Index option at PHLX) and options on stock index futures, such as the option on the S&P 500 Stock Index future at the Chicago Mercantile Exchange and the option on the NYSE Composite Index® future at the New York Futures Exchange.
This tax treatment also applies to regulated futures contracts and certain options where the underlying property is not equity based, such as interest rate, foreign currency (for example, those traded on PHLX), and commodity options and futures options. These instruments are referred to as "Section 1256 contracts."
Options on a stock index of a type that has neither been designated by the Commodity Futures Trading Commission (CFTC) as eligible for trading on a commodity futures exchange nor has been determined by the Treasury to be eligible for such designation are generally subject to the rules governing the taxation of options and are not entitled to 60/40 mark-to-market treatment.
Overall, their summary of the tax law relating to these options is quite good, although nowhere near as readable as my writing. :-) If you want to read the whole thing, here's where to go:
cboe.com
If you're uncertain about the treatment of a particular option, it's a good idea to contact the exchange where the option is traded.
Kaye Thomas, author
Fairmark Press Tax Guide for Investors
fairmark.com |
