In article <gdii7u$tis$1[at]registered.motzarella.org> ,
joetaxpayer <joetaxpayer[at]nospam.com> wrote:
- quote -

Yes. The Instructions for Schedule D indicate that the sort of
instruments the IRS expects on each line is one option or one stock,
not "bear spread Stock Date 2 strikes".

Seth

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In article <m363nn9sh4.fsf[at]swing-shift.time-tripper.com> ,
Rich Carreiro <rlc-news[at]rlcarr.com> wrote:
- quote -

I believe the treatment for an exercised option folds it into the
stock; consider an exercised call, on which you hold the stock for
years. There's no taxable event when the call is exercised, your
basis for the stock is the cost of the call plus the cost of exercise.

So yes, the options are folded into the stock transactions.

Seth

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Seth wrote:

- quote -

Seth - I want to be sure I understand clearly. I'd expect this to appear
on schedule D as one transaction, a sell/buy, as it was a bear spread,
but still one transaction. When you say 'each leg taxed on its own' are
you suggesting this look like two separate transactions on the form?
Joe

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sethb[at]panix.com (Seth) writes:

- quote -

So I only show the stock sale (using the adjusted basis/proceeds)
and don't show the options at all?

--
Rich Carreiro rlc-news[at]rlcarr.com

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In article <m3abcz9w29.fsf[at]swing-shift.time-tripper.com> ,
Rich Carreiro <rlc-news[at]rlcarr.com> wrote:
- quote -

Your cost for the shares purchased was the strike less the premium
received for the short put.

Your proceeds for the shares sold was the strike less the premium paid
for the long put.

The fact that there was a bear spread is irrelevant. Each leg is
taxed on its own.

Seth

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I put a bear put spread on SPY (not a typo -- the ETF, not the index)
at the end of September using October puts. The strikes were at 110
and 105. As we came into expiration week, I tried to unwind the spread
but the bid/ask on the component options were such that I couldn't
sell it for the net $5 it was obviously going to be worth.

October 18 came and I (obviously) got an assignment on the short put
at $105, and the long put at $110 was auto-exercised, so my brokerage
account shows a purchase of however many shares of SPY at $105 and a
sale of the same number of shares of SPY at $110.

My question is how do I report this? I know what I paid for the long
put and what I received for the short put. But rather than being
closed out, they were exercised and went "poof". Do I report the
options at all, or just bundle the net premium paid to put on the
spread into the stock purchase/sale? If I do report the options, how
do I show it on Sched D?

--
Rich Carreiro rlc-news[at]rlcarr.com

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