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Author: stockgame101 Two stars, 250 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121144  
Subject: Tax Implication: Close Option and Sell Stock Date: 7/21/2011 4:02 PM
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I posted the below in the SA Board for IDCC but was referred to this board for better chances of a detailed response. Will appreciate any guidance.

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All - Need a bit of help -

Background: A little over a month ago, I sold IDCC Sept 2011 $40 calls (when the stock was at $35-37 range) to protect against an unfavorable ruling against NOK. I have the same number of shares at a cost basis @ $25 or so. So in effect, the call is a covered call. Needless to say, today, my stocks have more than tripled in value, but my options are keeping up pace and negated all that nice jump. Overall, have a 60% gain (over many years - held IDCC since '05 I think, which translates to 7-9% annual return), so am not losing money BUT extremely sad to have missed out on this. Another red-flag on my investing style - first NFLX, now this. Haven't mastered the art of selling as much as buying in.

Desired Goal: Anyway, I want to close my option position and sell my shares on the same day as two separate transactions because my stock gains are long-term, and my option losses are short-term.

Question: Wwould wash-sale apply here because the transactions are done on the same day (hence within the 30/60 day window) on the same security? (OR) Can I actually list the option loss as a short-term loss and list stock gains as a long-term gain in Schedule D and do calculate them individually?

I have AAPL option gains enough to offset IDCC option losses - so from a short-term gain/loss perspective, I can have the +ve and -ve number offset each other - close to zero. And I have the IDCC stock gains to get me long-term gains rates that & hopefully get long-term TAX rates.

Any perspective (or) prior experience would be appreciated...

Thanks!

PS: Understand the "please check with your tax advisor" type disclaimers, but am interested in the community perspective on the above situation.
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