The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: Wash sale rule question and capital losses||Date: 7/12/2000 11:51 PM|
|Author: edcosoft||Number: 37410 of 121182|
I'm having some trouble understanding your statements, Roy. From my statements perhaps you can explain your statements and/or supply some authority.
question posed: <<This brings up a question I had. Is it considered a wash sale if you
have a cap. loss after selling a call/put option and then buy the
underlying stock within the 30 day period?>>
Your reply: Potentially yes...depending upon how the transaction is structured. But
now things can get pretty complicated. So without a specific example,
I hesitate to provide any "rule of thumb".
Where the wash sale rule is applied because of the acquisition
I presume this acquisition is the triggering position that becomes the Replacement Shares
option or a contractual right (or obligation) to buy property
I presume you purchased a Call
the property sold at a loss,
This is the potential Wash Sale, a stock you bought and have now sold at a loss.
and the option or right expires unexercised,
the Call expires worthless
the previously disallowed loss
this is the potential Wash Sale above.
will presumably be allowed as of the
date of such expiration.
I presume the "such expiration" is the expiration of the Call and you added the Wash Sale loss to the cost of the Call so you take the entire loss of both when it expires. I presume you presume there are no other positions open for another 30 days. Did I get that right?
In the case of a call option, this results from the application of the rules
set forth above relating to options transactions.
I couldn't find the rules you refer to
deep-in-the-money put is granted, the gain realized when the option
expires will apparently be set off against the loss sustained on the sale
of the stock.
I'm having trouble following this. "Loss sustained on the sale of the stock" I presume is an unmentioned *long* Wash Sale prior to granting the Put, which you say expires so is a gain that absorbes the wash sale loss. The granting of a Put is a long position, however, technically you didn't *acquire* an offsetting position. In addition, when it expires it is actually a short trade, which can't trigger a long loss wash sale. It was evidently not deep enough in the money to be a sure forced purchase by you, so you never bought the shares that would have been the Replacement Shares.
Actually the poster's question was if he *bought* a call or put, and sold it at a loss, would buying the stock trigger a wash sale. I would initially say Yes to both. Even though a bought Put is a short position, when it closes it is a long transaction. On the other hand how could buying stock be a hedge to replace your original position of an option to sell your stock?
It makes even less sense when it is done after the Put expires! I think if the stock was purchased before the put expired it would NOT be considered Replacement Shares becuase the bought put is a short position.
Could you elucidate? Ed
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