Tax on Writing Options

Tax time. For those of you who are familiar with tax reporting…some help please. In 2009, I have made few thousand dollar in writing option contracts, calls and puts. I kept the premium once the options expires worthlessly. I looked at Turbo tax, it doesn’t have a way for me to enter those option transcations. Any advice would be greatly appreicated. Thanks!!

What version are you using? I had 20 or so option trades in 2009 that I was able to import.

I am using the online premier 2009 version.

I think you’re going to need to move to the DVD version. I’ve done this transaction as well and used quicken for a long time

In the DVD version, do I still have to treat my cost basis as $0? Or the software can understand it is a sell then expiration transcation? Thx!

Wouldnt the cost basis be zero? Since proceeds received will be net of commission…I think it pulled mine in this way from fidelity.

Does TT give you a list of broker (TDAmeritrade is who I use) to download from?? I used online premier, I didn’t see a choice to do so…or I simply missed that feature.

yes…you can select to import from financial institution and then it has a long list. I would assume ameritrade is on there.

Brokerage firms usually can’t capture all your option-writing trades, so you have to 1. download all your option trades 2. set cost basis as zero 3. treat your premium income as capital gain 4. Input them one by one into schedule D of turbotax. 5. It gets even corky when the options are called and now it becomes a stock trade. I have to do these every year for my own investment. It’s a pain.

Also - If you write puts and it gets put to you, you can reduce the basis of the stock put to you rather than take the gain… Additionally, if you write options it isnt a gain until expiration, so keep that in mind if you write over more than a one year time frame.

I used the Premier TT version. My little brokerage, Trade King, allows me to download the trade data files which are then just imported very easily. All of my option trades were included.

Must be operator stupidity (me)…I am going to re-visit TT tonight. Thanks for all the help!!

Also, it is my understanding that if the options you sold were cash settled on a broad based stock index (such as options on the S&P 500) they are considered 1256 contracts. 1256 contracts are marked to market at year end and taxed as 60% long term 40% short term capital gains. See IRS publication 550 for details.