Schweser concept checker 12, question 9 says: Premiums paid are SFR 100k and received are SFR 70k. The investors country taxes option premium received as income at 40% and option premiums paid reduce the cost basis of the underlying. Asset sales are taxed at 10%. What is the effect on current period tax-return? Answer says:
- SFR 70k is received and taxed at 40% for tax due of SFR 28k. The SFR 100k paid increases the cost basis of the underlying asset. When the asset is sold (not this period), that reduces any gain taxed at 10% by SFR 100k, a tax saving of SFR 10k. Is there a typo in the question, where it says option premiums paid reduce the cost basis? It should be option premiums increase the cost basis (as per the answer)?