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Financial Planning / Tax Strategies


Subject:  Re: Tax Implication: Close Option and Sell Stock Date:  7/26/2011  2:39 PM
Author:  wsmit56 Number:  113812 of 129658

Per IRS Publication 550,

You cannot deduct losses from sales or trades of stock or securities in a wash sale.

A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:

Buy substantially identical stock or securities,

Acquire substantially identical stock or securities in a fully taxable trade,

Acquire a contract or option to buy substantially identical stock or securities, or

Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA.

This means that the wash sale rules are activated when you buy, AND THEN BUY within the time window.

If I understand your fact situation correctly, you already own both the short and long positions of this company's stock. If so, you are simply selling during the time window, there are no purchases.

If so, the wash sale rules do not apply.

Note that stocks and options can be considered substantially identical.

Hope I got the fact situation correct.

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