Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Stock Swap -- Ignore unavailable to you. Want to Upgrade?

To: Blue h2o who wrote (13298)	4/20/1998 8:44:00 AM
From: SE	Read Replies (2) \| Respond to of 17305

Kurt, We both are learning something from this. I found this pertaining to wash sale rules: "No loss is recognized on the sale or other disposition of stock or securities if the taxpayer acquires substantially the same stock or securities within 30 days either before or after the date of the sale or disposition. The disallowance of the loss also applies if the taxpayer has entered into a contract or option to acquire substantially the same stock or securities within that same 61-day period." So this is somewhat more complicated than I first imagined. First off, I still hold to the concept that options are not substantially similar....meaning that if you purchase a May option and it expires, the wash sale rules will not apply to a June option. I simply would not believe that the rule would apply as May and June are different months and therefore the options are not similar. I think the conversion to the stock or the right to convert is the important part. The way that I would treat this is to concentrate on the number of shares. For example, you own 100 shares of CYMI and 1 May option. Upon expiration of the May option you purchase a June option, same strike. I would write off the May option as a loss and not apply the wash sale rule. This would require further research, but I think that the substantially similar applies only to the shares. Now, let's say you sell 100 CYMI for a loss of $100 and then within the 61 days encompassing the sale, you buy one call option. This is the rule the above speaks to and then the wash sale rule would apply. Upon expiration or sale of the call option the transaction is completed and you no longer are subject to the wash sale rules. Also, remember that if you close out all positions by Dec. 31, it does not matter. It only comes into play if you hold a position between tax years. Feel free to email me your specifics, including number of shares purchased and date and number of options purchased and date. Amount of purchases in dollars would help, but is not critical. Remember, wash sale rules only apply to losses and not gains. This is an aside and not necessarily directed to you, but I think others reading this should know that. -Scott