...Please read till the end...I posted following note on "Ask a Foolish Question":======================================================I execrised three contracts for XYZ(automatically) on expiration date.Of these three, 2 were bought for strike pricesay 60 and the third for strike price 80. The costof option (premium) was different for each purchase.All 3 contracts had SAME expiration date.Of the 300 common stock that I have now,200 have cost basis of 70 (60 + 10 for premium)100 have cost basis of 100 (80 + 20 for premium).I wish to sell 100 stocks now. Since all 300 Ihave were bought on same day (I cannot use FIFO),what is my cost basis for the purpose of capitalgains calculation?======================================================TMF Karen suggested that I check the FAQ on Taxes boardand then post a question there. I checked the FAQ andthe information I got there is I believe incorrect.I sent a note to TMF Karen again but was requestedagain to post the message here. Following is my noteto TMF Karen:======================================================Dear TMFKarenYou suggested me to check the Taxes message boardon my question regarding the option exersizing andcost basis. (Ask A Foolish Question)I checked the Taxes FAQ (Investment Issues, Stock Options)I am not very sure if the information in that post is correct.It says that when one exersizes an option, the difference betweenthe price paid for the contract and the fair value of the stock onthat day is Capital gain. And is taxed immediately.I found contrary information on IRS's website.Here is the link:http://www.irs.gov/forms_pubs/pubs/p5500407.htmThe page is quiet long. Look for "Calls and Puts"and click on the link for Table 4.1 which summarizesthat section.In my case, since I exersized the call options I bought,the price I paid for those contract should be added to theprice I paid for the stock when I exercised it. (The strike price+ option price) is my cost basis.My question was due to the fact that I exercised TWO separatecontracts with same expiration date but different strike price andoption price on SAME day.Regards======================================================
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |
BATS data provided in real-time. NYSE, NASDAQ and NYSEMKT data delayed 15 minutes.
Real-Time prices provided by BATS. Market data provided by Interactive Data.
Company fundamental data provided by Morningstar. Earnings Estimates, Analyst Rat