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Just found this board after posting the following over at the CMGI board. This seems like a more appropriate forum for the question so here goes again....


I hold a boatload of March 2000 CMGI Calls that I have been reluctant to sell until after 1/1/2000, because I don't want to pay taxes on the capital gain in 99.

Having said that, I just came across the following post stating that the IRS considers ALL option positions to be CLOSED ON PAPER on 12/31, even if the position is not actually sold-to-close.

If this is true, then I will probably take some profits now instead of waiting for 1999 to end, since the IRS will tax me for the unrealized gains anyway.

Can anyone confirm or deny if the following is true, and would it mean that my 3/00 Calls would be taxed as a 1999 capital gain even if I don't close them out until 2000?

Thanks in advance!


TAX CONSIDERATION...holding a JAN 00 PUT (to protect and lock in your paper CAP. GAINS) is a very wise choice for the following reason:

On Dec 31st (EOY), the IRS considers ALL option positions to be CLOSED ON PAPER. The result is an ACTUAL TAX DEDUCTABLE LOSS for 1999 while the paper CAPITAL GAIN on your stock is NON-TAXABLE! The ABSOLUTE best of both worlds!

Watch those PUT option prices for JAN 00 (DEC will not work the TAX ADVANTAGE since they expire prior to EOY)! Hang on to your stocks that are performing well. Once again the IRS considers ALL OPTION conracts as CLOSED on paper for a TAX LOSS (the new base price will forward to the yr. 2000 for 2000 tax this is a TAX DEFFERAL in essence!

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