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If I sell a covered call, in the year end statement from my broker, my broker says that this transaction has not been reported to the IRS.

Is the premium taxable as regular income? OR
Can I deduct the premium from my original purchase price and thereby increase my long term capital gain?
OR
Is the premium not taxable?

Thanks,
Jedi
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Jedi,

Greetings and welcome to the Motley Fool message boards.

The reporting requirements for a covered call vary depending on a number of circumstances, but none of the alterniatives you listed would be correct for an average investor (as opposed to a professional trader).

Some time ago a posted the circumstances which would have an impact on reporting covered calls, along with the procedures to follow in most circumstances. You can find that post at

http://boards.fool.com/Message.asp?id=1380046000355000

I hope it answers your questions.

Good Luck,
Z
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If I sell a covered call, in the year end statement from my broker, my broker says that this
transaction has not been reported to the IRS.

That is correct

Is the premium taxable as regular income?
NO
OR Can I deduct the premium from my original purchase price and thereby increase my long
term capital gain?


Not until and unless you actually deliver your shares when your Call is called.
OR Is the premium not taxable?

That's right, not until you cover, you sell, or it expires. Ed
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Thank you Zman, I have printed your discertation and will study it. Right now I am still confused but I believe if I study your post I will get it.

By the way, I always thought a straddle was something you did on a horse.

Jedi
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