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If I sell a CPQ LEAP option (that expires in JAN 2001) for a loss and buy a CPQ LEAP option expiring in JAN 2002 is this considered a wash sale for tax purposes or would I be permitted to take a capital loss on the JAN 2001 option?


That's a definate maybe.

The problem is that the IRS has never issued guidelines for when two different options are considered similar enough to invoke the wash sale rule.

From what I have seen in other discussions, unless both options are very deep in the money or both are very deep out of the money, there is almost no chance that the IRS would require you to report it as a wash sale.

The difference between an option expiring in eight months and one expiring in 20 months would probably be great enough that the odds of having the IRS consider the swap a wah sale appears to be quite low, regardless of the strike prices. If you use different strike prices the risk becomes nearly nill. (I think.)

Without IRS guidelines I do not think anyone can give you an absolute answer.

Good Luck,
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