Tax strategy on ITM option

[benchmark]

1 hour ago, ERICOPOLY said:

 

Care needs to be taken to assure that investors maintain at least a 15% band, even if that requires an out-of-pocket expenditure.

 

https://www.nysscpa.org/news/publications/the-trusted-professional/article/tools-techniques-to-shield-and-defer-taxes-on-unrealized-stock-gains

 

 

FB right now trades at $348.  So I figure if you buy a put far below this level... like under $270 strike... then that should be well clear of this "15% band" that is recommended in the article above.  The IRS apparently doesn't want you to be able to use a put to lock in all of your gains without leaving some of your skin in the game, so they'll rule it a constructive sale if you hedge with at-the-money puts.

 

So I believe you can use a put strike somewhere considerably higher than $180 without running afoul of what is recommended in that article.

 

 

 

Do you know the "15% band" rule documented somewhere? searching on IRS website didn't get me anything.

[ERICOPOLY]

7 hours ago, benchmark said:

Do you know the "15% band" rule documented somewhere? searching on IRS website didn't get me anything.

 

They have never ruled on it.  So I don't push my luck -- 20% or more for me.