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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Big Dog who wrote (40988)	3/29/2005 1:29:08 PM
From: ChanceIs	Read Replies (3) \| Respond to of 206323

On options gains: Check me on this, but I am relatively sure that if you are synthetically long (e.g. by holding a CALL leap) for more than a year (a year and a day) then you are eligible for LT gains status on the leap. The IRS is very philosophically inconsistent. I am really very sure that if you held a PUT leap for a year and a day, that you would not be eligible. The IRS considers shorting "evil," and by being long a put leap, you are short. The same sort of irrationality probably applies to shorting a CALL leap and holding the position for more than a year. You probably can't claim shorting a put leap for LT gains either, despite the fact that you would be synthetically long the underlying equity. Check me, but I believe that there are no LT gain status available for shorting equities directly. In the eyes of the IRS, the borrowing of the stock means nothing, and the sale of the stock means nothing. When you buy it back after the short, then you are long, and perhaps long only the ten seconds or so it takes your broker to present the stock back to the lender. Hence you were only long ten seconds. Only being long is blessed by the IRS. It is interesting to go on the SEC website and read their philosophy and defense of shorting. It is rather profound, well defended, and I agree with it. Apparently the IRS feels that we all should have held Polaroid and Enron into oblivion. The IRS is a little like Gollum in the Lord of The Rings - it is there to trip you up, stab you in the back, and in general impede business. In some obscure way, it may yet save Western civilization, but nobody has yet determined how.

To: Big Dog who wrote (40988)	3/31/2005 4:42:10 PM
From: Tommaso	Respond to of 206323

I see there is lots of further discussion, better informed than anything I might post. As far as I can tell, options are capital assets and subject to capital gains and loss rules, except when you use them to hedge a position in the same stock. Then I do not know how to figure it all out. It certainly is true that a short-selling profit is short term, not matter how long the position has been held. Then there are all sorts of rules about restarting the holding period by shorting against the box. At one point I understood these somewhat but have not done this sort of transaction for several years.