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Author: tritha Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121570  
Subject: Re: IRS? - Reporting Option Income Date: 12/6/2002 2:23 PM
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This is my first year trading in options and need to know how to report the money's made/lost to the IRS - or do I? I would think they would like their share.

So my basic questions are:
How/where do I report money made from writing covered calls?

How/where do I report money made or lost from buying and selling calls/puts?

Corey


I will assume you are not in the business of granting options.

The answer your first question depends on wether the option was exercised or it expired. If you write a covered call and the call is exercised, the amount you received for the call is added to the sale price of the stock. If the call expires you would have a short term gain.

The answer to your second question also depends on wether the puts/calls were bought or sold and if they were exercised.
If you bought and sold the same option you would match the purchase and sale price to determine gain or loss. If a call is exercised , its cost is added to the seller's proceeds and to the buyers basis of the stock purchased. If a put is exercised its cost reduces the amount realized on the sale of the underlying stock.The seller's cost basis in the stock he sold is reduced by the amount received for the put. Gain or loss could be long or short term depending on the holding peroid of the stock. If the options expire there would be a short term gain or loss depending on wether you bought or sold the options.


As you can see it can get very complicated . Good luck

Bill
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