How do I report the proceeds of the covered call option I recieve on my tax return?

Question

I sell covered call option on a stock I owned and paid according to the market price. How do I report the proceed in my income tax return? Thanks.

Answer 1

If you were assigned add the proceeds from the sale of the call to the proceeds from the sale of the stock and use that total as the proceeds from the sale of the stock.

If the position was still open at the end of year do not report it. It does not become a recognized gain or loss until it is closed.

If the position was closed, through either a "buy to close" transaction or expiration, you need to determine if it was a qualified covered call. The criteria for a qualified covered call are on page 59 of

http://www.irs.gov/pub/irs-pdf/p550.pdf

If it was a qualified covered call simply report it as a short term capital gain on Schedule D. (If the option expired worthless use the expiration date as the purchase date.)

If it was not a qualified covered call, use Form 6781 to report all the realized and unrealized gains and losses of the offsetting positions.

Answer 2

Report it as a short term capital gain or loss on Schedule D. Option proceeds are not usually on the 1099-B from your broker but the sale is still reportable in the year the option was closed.

Answer 3

Qualified Covered Call

Answer 4

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