Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev Thread | Next Thread
Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121180  
Subject: Covered call and tax losses Date: 10/19/2001 4:20 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
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.
Print the post Back To Top
Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54704 of 121180
Subject: Re: Covered call and tax losses Date: 10/19/2001 4:32 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
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

Print the post Back To Top
Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54706 of 121180
Subject: Re: Covered call and tax losses Date: 10/19/2001 4:44 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
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.

Print the post Back To Top
Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54707 of 121180
Subject: Re: Covered call and tax losses Date: 10/19/2001 4:50 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
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

Print the post Back To Top
Author: EGUSC Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54719 of 121180
Subject: Re: Covered call and tax losses Date: 10/19/2001 10:06 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
"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.

Print the post Back To Top
Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54748 of 121180
Subject: Re: Covered call and tax losses Date: 10/22/2001 12:11 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
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.

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev Thread | Next Thread
Advertisement