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Author: TMFBigFrog Big red star, 1000 posts Old School Fool Home Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121159  
Subject: The Question That Didn't Need to be Asked! Date: 9/27/2012 11:05 PM
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Dear Tax Fools:

Thank you very much for your help over the years. Because of your consistent and clear feedback on this board, I knew just where to look figure out what would otherwise have been a fairly complicated for me tax situation -- Publication 550 http://www.irs.gov/publications/p550/ch04.html#en_US_2011_pu... .

The story: I sold short some put options earlier in 2012. Exactly half of those options were exercised early by someone else, and I had the related shares put to me. The other half of those options, I rolled forward for a credit, but ended up spending more to buy back than I received as a premium for selling that half of the puts in the first place.

Upon reading Table 4-3 in publication 550, I figured out how to treat that series of transactions for my income taxes -- saving me from having to ask here, later.

So here's what I plan to do:
* Split the net premium I received after commisions for the initial short sale in half.
-> One of the halves is the sale price for the options that I rolled foward. That helps determine the short-term capital loss I will claim on that position.
-> The other half serves to reduce the purchase price for the shares that were put to me. My holding period on those shares starts the day they were put to me, and my basis is reduced by that second half of the short sale put options premium.

So thank you for answering similar enough questions here in the past so that I didn't have to bug you with this one this time around.

Best regards,
-Chuck
Inside Value Home Fool
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