Question about the 15% tax on dividends

Discussion in 'Trading' started by nravo, Jan 18, 2009.

  1. nravo


    I have to hold for 61 days right? But what if I am hedged on the underlying stock during those 61 days with a short very deep I-T-M option. Does that change the holding period? Or does the law ignore this?
  2. Yes on the 61 days. I don't think it matters if it's covered stock, but I can't keep up with the tax laws. What does your tax guy say?
  3. nravo


    Interesting that the IRS would miss this options issue with the dividend tax. Hard to believe, actually.
  4. the irs didn't miss anything, it is YOU that missed the irs regulation in pub 550.

    more specifically this paragraph

    Holding period reduced where risk of loss is diminished. When determining whether you met the minimum holding period discussed earlier, you cannot count any day during which you meet any of the following conditions.


    You had an option to sell, were under a contractual obligation to sell, or had made (and not closed) a short sale of substantially identical stock or securities.

    You were grantor (writer) of an option to buy substantially identical stock or securities.

    Your risk of loss is diminished by holding one or more other positions in substantially similar or related property.
  5. nravo


    Thanks, sport. You answered my question. There goes another strategy.