Accountants: In what year is the income taxable when an option is written in December, and expires in January?

1 Answer

Answer :

answer:Check out IRS Pub. 550 – This seems like the most relevant section – it looks like you have a short term gain but not at receipt: Writers of puts and calls. If you write (grant) a put or a call, do not include the amount you receive for writing it in your income at the time of receipt. Carry it in a deferred account until: Your obligation expires, You buy, in the case of a put, or sell, in the case of a call, the underlying stock when the option is exercised, or You engage in a closing transaction. If your obligation expires, the amount you received for writing the call or put is short-term capital gain. If a put you write is exercised and you buy the underlying stock, decrease your basis in the stock by the amount you received for the put. Your holding period for the stock begins on the date you buy it, not on the date you wrote the put. If a call you write is exercised and you sell the underlying stock, increase your amount realized on the sale of the stock by the amount you received for the call when figuring your gain or loss. The gain or loss is long term or short term depending on your holding period of the stock. If you enter into a closing transaction by paying an amount equal to the value of the put or call at the time of the payment, the difference between the amount you pay and the amount you receive for the put or call is a short-term capital gain or loss.

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