Taxes and options

[rohitc99]

I have question on options and taxes and would appreciate if someone can answer or direct me to the right source for it

 

- If i sell an option at a loss and buy the common on the same stock at the same time in a 401K or similar tax deferred account, does the wash rule apply ?

- does the wash rule apply if i sell the option at a loss and buy the common at the same time in a regular brokerage account ?

 

thanks in advance

[JBird]

It appears the answer is yes and yes, and that separate brokerage accounts make no difference.

 

http://www.irs.gov/publications/p550/ch04.html#en_US_2012_publink100010601

[merkhet]

A related question.

 

Let's say I bought SHLD in August. Assume SHLD goes to $100 by November, and I buy 2015 $100 puts on my entire position. What is the earliest date that I can exit my Sears position to avoid paying short-term capital gains?

 

The alternative formulation is as follows:

 

Let's say I bought SHLD in August. Assume SHLD goes to $100 by November. What can I do in order to maintain (most) of my gain and avoid paying short-term capital gains tax?

[merkhet]

Found my answer.

 

http://www.investopedia.com/ask/answers/12/leap-option-held-more-than-12-months-tax-treatment.asp

[rohitc99]

It appears the answer is yes and yes, and that separate brokerage accounts make no difference.

 

http://www.irs.gov/publications/p550/ch04.html#en_US_2012_publink100010601

 

thanks Jbird. does it mean that the same rule applies if i sell a put and buy a call on the same stock

 

if i buy a put for 100$ and sell for 80. incur a loss of 20$.

at the same time i buy a call for 80$. the wash rule will imply, that i cannot claim the tax loss, but can step up the tax basis for the call to 100$ ?

 

thanks in advance

[JBird]

I'm not a tax expert, I'm just a man with Google. The IRS is using the term "substantially identical" when deciding whether the rule applies. If I had to guess, I'd answer yes and yes.