On Feb 10, 5:25*pm, se...[at]panix.com (Seth) wrote:
- quote -

Confirm, the IRS Publication covering that is Investment Income and
Expenses - Publication 550, heading 4 Sales and Trades of Investment
Property, topic Capital Gains and Losses, sub-topic Options.
a) The call premium paid is added to the cost basis on exercise.
b) If a (covered) call is sold and exercised, the call premium
received is added to the sale price of the stock.
c) If a cash covered put is sold and assigned, the premium received is
subtracted from the cost of the stock, and,
d) if a put is bought and exercised the premium is subtracted from the
sale price of the stock.

Generally, the holding period for the underlying stock determines the
treatment of the option premium. E.g. if a covered call is exercised
after the stock has been held one year and one day, the premium is
long term. E.g. if stock is assigned pursuant to a put you sold, the
holding period begins with the puchase of the stock. E.g. If you buy a
call which you subsequently exercise to purchase the stock, your
holding period for the stock begins with the exercise date. (The
purchase of a put is treated as a short sale, and I'm not sure I
understood the tax treatment for the holding period, but apparently
the holding period begins with the purchase of the put - sorry I just
don't quite get it, but it would seem to differ from the treatment of
a call purchased.)

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In article <3uduq358oom0clgqsp3jitjgkacuhehc53[at]4ax.com> ,
Thanks <Thanks[at]usenetserver.com> wrote:

- quote -

$5.5 plus commissions (on the option purchase, and the exercise fee).

Seth

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Hello

In the early 90's I purchased a stock option for $0.50 with a strike
price of 5.

Near expiration I exercised the option and brought the stock at 5.

Is my basis for that stock 5 or is it 5.5 (including the cost of the
option)

Thanks very much.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >