Question about covered calls and taxes

Discussion in 'Options' started by raz000, Aug 22, 2012.

  1. raz000


    I want to get started selling covered calls, but I want to make sure I inderstand that tax implications before doing so. Much appreciation to anyone who can help.

    I understand if I sold a covered call which gets executed, the premium gets added to the cost. Then you figure out if the underlying stock was held LT or ST. Ok, but here's my question:

    Let's say you bought 70 shares of stock AAA on 1/1/2010 (LT). Then you bought 30 more shares of stock AAA on 8/1/2012 (ST). Then you proceed to sell 1 covered call expiring in OCT 2012, and it's exercised. When reporting taxes how do you split this up? 70% long term and 30% short term? Do you also split the premium 70/30? Or does majority win?I do not remember seeing a way to do this on the tax forms.