Question on reporting selling put and call options

Forum|Forum|5 years ago
February 15, 2021
3 replies
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In 2020, I made the following four option transactions:

In June, I sold a covered put option that expired after 30 days I received a premium of $24.00.

In July, I sold a covered put option on the same stock that was exercised which resulted in me buying 100 shares for $4,300.00. I also received a premium of $25.50.

In August, I sold a call option on the same stock I purchased that expire after 30 days. I received a premium of $32.00.

In September, I sold a call option on this same stock which exercised resulting in me selling my 100 shares for $4,700.00. I also receives a premium of $31.50.

I know these are all treated as capital gains but I am not sure how they would be recorded on form 8949.

Are the two premiums on the expiring contracts treated as separate transactions with a zero cost basis?

Do I report the premiums from the exercised transactions the same way as above or do I ONLY use these two premium to adjust my cost basis on my stock sale and purchase.

Best answer by DavidD66

The options that expired, are reported as independent transactions. For the put you sold that expired, report it with proceeds of $24 and a cost basis of 0. Same for the expired Call, it will have proceeds of $32, and a cost basis of $0.

The options that were exercised are not reported, and adjust the basis of the underlying stock that was purchased or sold.

DavidD66Answer

The options that were exercised are not reported, and adjust the basis of the underlying stock that was purchased or sold.

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Employee

refer to IRS Pub 550 for the treatment of all scenarios you can imagine.

Mike9241

when you get your 1099-B, that would have all the info you need. if your broker partners with Turbotax you should be able to import the transactions that need to be reported.

stephaneich

Mike, I don't think that works perfectly with short options. I imported from TDAmer and all the trades that involved the short sale of a call or put were flagged to be reviewed. The dates were the confusing part. They had the cost basis as zero and the proceeds (or lack there of) correct but the date acquired was the date the trade closed. Right or wrong, I changed the dates. Thanks for the clarifications here. I am now less confused. 🙂

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Employee

@stephaneich

Your 1099-B conforms to the IRS reporting rules for short sales.

You are acquiring a security to close your short position.

That happens on the date you close the trade and that is Date Acquired.

The security purchased, an option, settles one business day later. That is the Date Disposed.

Your 1099-B probably shows both dates the same.

The day you entered into the short position is irrelevant.

Larrystephb

All my options sells (put or calls) transfer over from the financial institution to TurboTax as stock employee options. I have to go back & manually change hundreds of these to options. Also when you sell an option and the cost basis shows zero the the proceeds shows the amount received TurboTax does not know how to handle these transactions. The review flags hundreds of these. I need to switch to a different program or stop selling options.