Tax loss harvesting with selling ITM Put options

Discussion in 'Taxes and Accounting' started by assetalloc, Dec 1, 2018.

  1. ET180

    ET180

    Say I short a put and the value of the put increases. If I cover the short put at that point, then I'm taking a loss. If I let the put get assigned, then I have long shares. If I then sell the shares for a price lower than the cost basis that I paid for those shares (remember to subtract the premium received to decrease the assignment price of the shares -- if I was assigned a call, then I would add the premium received to increase the short price) then it's still a loss. But when rolling puts, they are 2 different trades. One is a closing trade for a debit, and the other is an opening trade for a credit. Are the contracts "substantially similar"?

    To say that rolling puts would not result in a loss would be to claim that an Mar XYZ 100 put is "substantially similar" to a Jun XYZ 100 put. I would say that due to the different time duration, they are not substantially similar especially as March approaches. If we're more than a year away from the expiration, then an argument can be made that they are substantially similar. Question is where would the IRS draw the line? I think it's less of a grey area than applying wash sales to trading two different ETFs with same exposure. I am not an accountant so this is just my interpretation.
     
    #21     Dec 9, 2018