How are put and call options reported wrt taxes?
How are put and call options reported wrt taxes?
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RussAbbott · External communityPost link
External question — Personal Finance Stack Exchange
Author: RussAbbott
Original post: https://money.stackexchange.com/questions/133903
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My broker tells me that option transactions are reported for tax purposes as two independent transactions. That is, the net profit or loss is not reported. Instead, the receipts from the sale of the option and the cost of the option purchase are reported separately as a profit and loss respectively.
I was also told that these reports apply to the tax-year in which they occur. If, for example, I buy an option this year, the entire cost is reported as a
loss
for this year. If I sell it back next year, the entire receipt of that sale is reported as a
profit
on my next-year tax return.
That seems to suggest that one could create a loss this year (perhaps to offset a gain elsewhere) by buying an option on Dec 31, 2020, and then selling that option on Jan 4, 2021. The two amounts will not be exactly the same, but let's assume they are close. Haven't I essentially moved a net gain from this year to next year?
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Quoted from Forex.com.bd-Editorial External question — Personal Finance Stack Exchange Author: RussAbbott Source score (net votes, not local likes): 1 Original post: https://money.stackexchange.com/questions/133903 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. My broker tells me that option transactions are reported for tax purposes as two independent transactions. That is, the net profit or loss is not reported. Instead, the receipts from the sale of the option and the cost of the option purchase are reported separately as a profit and loss respectively. I was also told that these reports apply to the tax-year in which they occur. If, for example, I buy an option this year, the entire cost is reported as a loss for this year. If I sell it back next year, the entire receipt of that sale is reported as a profit on my next-year tax return. That seems to suggest that one could create a loss this year (perhaps to offset a gain elsewhere) by buying an option on Dec 31, 2020, and then selling that option on Jan 4, 2021. The two amounts will not be exactly the same, but let's assume they are close. Haven't I essentially moved a net gain from this year to next year?
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