I wrote covered calls on a stock that plunged in value and the shares were called today. I wrote calls twice netting about $1100. The sale of the stock will result in a taxable loss of approx $7500. The loss is short term. I won't get into the stock again for another 31 days if at all.Just so I fully understand:- Can I offset the gain on the options with the loss on the stock?- Can I use the remaining loss on the stock to offset other dividends, interest and cap gains?I'm under the impression that the answer to both is yes, but I figured I'd make sure.
You can offset part of the loss on the stock with the gain on the options. You can use the remaining loss on the stock to offset other capital gains. You can offset up to $3000 of remaining loss against ordinary income, which includes dividends and interest as well as salary or other income.If you have more loss than that, you can carry it forward to next year, and offset capital gains plus up to $3000 of other income. Best wishes, Chris
How long can I carry the loss forward? Do I have to use the loss against regular income or can I just carry it?Unfortunately, I am subject to (&^%%$#(! AMT, so I suspect that it will be a waste of time to use the loss against regular income. If I can defer for a year or two and offset cap gains or dividends, it would be preferable.
You don't have a choice as to when to take the loss. If you have more than $3000 that can't be taken against capital gains, the rest is carried forward. The process continues until either all the loss is gone, or until you die. If you have plenty of regular income, including dividend, interest, salary, whatever, you DO take the $3000 off the top. The AMT situation doesn't enter into it. Best wishes, Chris
"I wrote covered calls on a stock that plunged in value and the shares were called today"This does not make any sense to me, If a stock plunges in value the stock would not be called.
This does not make any sense to me, If a stock plunges in value the stock would not be called. **************Admittedly, I could have been clearer. I wrote the calls after the stock crashed. I recovered some of my initial investment that way.
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