The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: Wash sale rule question and capital losses||Date: 7/14/2000 5:14 PM|
|Author: TMFTaxes||Number: 37478 of 125423|
<<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? >>
Yo!! Ed!! Without posting all of the statements and responses in your original question again, I presume that your presumptions of my presumptions are correct. :-) There was a lot of unstated "givens" in the response, that you correctly pointed out. But on this point I think we are in agreement.
<<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>>
In my original response, I had another few paragraphs in there regarding calls and other option transactions. But I pulled them out before I "sent" the final response. I obviously didn't remember to change this reference. That's why you couldn't find the "rules set forth above" in the response. It was very dry and boring...even to me. And I'm not sure that it added to the discussion. But I'll re-state them if necessary.
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.>>
After reading your explanation, I believe I agree with your position.
<<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.>>
Ok...I had it turned around from the get go. I was working with a stock loss and then an option. So I was bass-akward from the get go.
<< 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.>>
And I think that I would have to agree. I think that my problem had to do with the fact that I was looking at the transaction the other way around. Sorry for the confusion.
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