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Author: stinkinbadges One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121216  
Subject: LEAPS Taxes Date: 10/8/2000 12:25 PM
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I posted this at the Options discussion board also. Not spamming. Just not sure where people would discuss this kinda thing. I've been reading both boards and tax publications trying to find answers but it's a tad confusing. If you guys have already discussed this perhaps you could help me find the thread.

Hello Gentlemen,
I've been trying to figure out through the LEAPS book by Roth how taxes work on offsetting positions and I can't seem to get a definitive answer from the book. Maybe you guys could help me.
My question relates to buying a LEAP and then having the underlying stock move up some and then selling an offsetting LEAP. It's a bull spread with a time lag.
Let me explain specifically. I bought QCOM 2003 LEAPS at a strike of $60 when the stock was at $59. So the LEAPS were out of the money. As the stock moves up I may chose to get my $30 back. On Thursday for instance I could have sold the $110 strike price LEAP for the same $30. So I get my money back.

So my question is "How would this be taxed?". If I hold till the LEAPS expire what's the taxable gain? Is it long term or is the holding period suspended while you have the offsetting positions? How about if you cash in at some point and sell the $60 and buy back the $110? What's the gain for tax purposes and how is it taxed?

Thanks in advance for any help you could offer. Sure seems to me that this is a great way to make money on a lot of the next generation networking stocks. Buy the LEAP at a strike price just above the stock price. Then wait for the inevitable move up. Sell another LEAP after a substantial move up and get your money back and then you "own" the spead. Then take the same money and do it with another stock. How this gets taxed is confusing me though.
Thanks for any help you ae generous enough to offer.
Glenn
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Author: zman49 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 40690 of 121216
Subject: Re: LEAPS Taxes Date: 10/8/2000 6:11 PM
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Glenn,

Since you already had one response on the Options board I added my comments there.

http://boards.fool.com/Message.asp?mid=13447072

Good Luck,
Z

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