Options, long stock, wash sale

Discussion in 'Options' started by 11Blade, Dec 31, 2007.

  1. 11Blade


    If I sell a long position in a stock and take an equivalent position in deep ITM LEAP, could I legitamately (legally) take the loss and it not be considered a wash-sale?

    They are two different securities right?
  2. NoBoB


    No, the options are considered an equivalent security.
  3. As previous poster mentioned, they are considered similar secutities (see IRS publication 550).

    I have a tax question...

    If I take a loss on a long stock position, I'm faced with the wash sale rule for 30 days on either sale of that closing transaction's date. Can I still trade the shares from the short side without violating the wash sale rule?

  4. Assuming that you mean that you hold long stock while simultaneously selling short (say in a different account) I think that is deemed a constructive sale. Meaning you have a wash sale.

  5. I think Spin is talking about going long to short in the same account, when he has a deductible loss upon closing the original long trade.

    It sounds like it would avoid the wash sale rule, because the short isn't the same position as the long - it's the opposite. But don't take my word for it.
  6. Hey Don,

    The IRS has put the kibosh (sp?) on selling against the box or what you indicated as "you hold long stock while simultaneously selling short (say in a different account)."

    As CB surmised, I was referring to being long a stock, taking a loss at the end of the year and then trading it from the short side for the next 30 days until the wash sale period is up.

    My two cents is that it's legitimate (not a violation) tho I haven't seen anything in my travels that indicates as much. I've been doing it and if I'm wrong, I'll jump off that IRS bridge if and when I get to it.

    Years ago, I used to trade with quite a number of brokers since I was an IPO whore. At tax time, I'd present my accountant with a disk which contained a spreadsheet for each firm that I dealt with. He in turn would combine all of the spreadsheets into one and alphabetize it. Apart from his obvious dislike of the IRS, he felt that the filers obligation was to present the correct information and pay the appropriate tax. Organizing the confirms was not necessary. I bet that you could hide an elephant in there if you trade enough (g).
  7. I'm sure he'll come out and show his face if you pay your accountant peanuts ;)
  8. Okay, I got it now.

    Yeah, seems to me selling short something that you previously held long is quite a different position and should not be subject to any wash sale implications.