To: Jacob Snyder who wrote (9481 ) 11/10/2001 8:34:06 PM From: RoseCampion Read Replies (1) | Respond to I'm not sure about the tax treatment of this. If I'm long the 2003 and 2004 calls 20s, and sell the March calls 20s, does the IRS consider I'm still long? Or do they consider that I have effectively closed the position? Seems to me this is analagous to selling covered calls against a long position. This gets absurdly complicated. one of the positions before its expiration - keeping the other position open beyond the current tax year. You'd technically have had what the IRS calls "offsetting positions" - the offshoot of which is you can't close one position without (getting hazy here) marking the other position to market when you calculate your gains/losses for the year. (This rule prevents the once-prevelant tactic of avoiding taxes by closing only the losing half of a hedged transaction in the current tax year, which allowed a trader to show a big loss even though the net gain/loss was essentially zero). So you'd run into potential trouble if you sold the Mar2002 calls now, but then bought them back in December of this year at a higher price, and didn't sell your long position at the same time. You'd be showing a loss on the short position even though it could be claimed that it offset the long position, and you technically might be forced to mark the long position at market for your 2001 taxes. Of course the probability of the IRS actually seeing this in a Schedule D listing of 100 trades is somewhere between nil and zero...
