Option Profits & Taxes

Discussion in 'US Taxes' started by DB, Jan 5, 2009.

  1. DB

    DB Guest

    Option trading in 2008. Probably about 50 trades with $10K. Made about
    $7K. Pulled principal (10K) in fall and had all earnings (7K) in other
    options on 12/31/08. Current value of option on 12/31/08 was only about 2K.
    What do I pay taxes on, 2K or 7K? Thanks. DB
     
    DB, Jan 5, 2009
    #1
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  2. DB

    P. Maffia Guest

    $7K
     
    P. Maffia, Jan 5, 2009
    #2
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  3. DB

    DB Guest

    OK, so if I sell this year for 2k, do I get to deduct 5k from my 2009
    earnings?
     
    DB, Jan 5, 2009
    #3
  4. DB

    P. Maffia Guest

    NO! You get to deduct the losses against any gains. Then if there is any
    loss left over, you get to deduct only up to $3,000 against regular income
    and if any loss is left over, you carry it forward to future years until it
    is all used.

    Just as a point of information for everyone, You should understand the tax
    implications of any financial activity you undertake BEFORE you engage in
    the activity. Although tax consequences should never be the sole determinate
    of what you do, you should understand them because not doing so could make
    the difference between success or failure.
     
    P. Maffia, Jan 6, 2009
    #4
  5. DB

    DB Guest

    I guess 3K is better than nothing. Seems I should have liquidated on 12/31!
     
    DB, Jan 6, 2009
    #5
  6. DB

    catalpa Guest

    Were any of the options held on 12/31/08 Section 1256 contracts (index
    options)? There are different tax rules for Section 1256 contracts, such as
    year end mark to market.
     
    catalpa, Jan 6, 2009
    #6
  7. DB

    DB Guest

    No. They are mostly put options on individual stocks, ...mostly.
     
    DB, Jan 6, 2009
    #7
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