Capital Gains and Losses
Questions and comments about tax rules for buying and selling stocks, mutual funds, real estate and other assets.
Reporting written options on 8949
Posted by: InTheMiddle, March 3, 2012 08:54PM
I've read through the instructions several times and did not find any clear statement about what goes in column (d) for options that are written and either expire or are bought back.

The instructions say: "If an option that was granted (written) expired, enter the expiration date in column (c) and enter “EXPIRED” in column (f). Fill in the other columns as appropriate."

Column (e) will obviously be the net proceeds from writing the option, but what date goes in column (d)? Is it the date the option was written or is it the date the option is bought back (or expires) because it's treated a short sale so the column (d) date is the date the option is acquired?

I think based on what I've read that for an option that's bought back prior to expiration column (c) will be the settlement date (next market day after purchase transaction) and column (d) will be the purchase transaction date and in the case of a written option that expires both (c) and (d) will be the expiration date.

I'd like to hear whether others agree or disagree (and if you disagree, what is correct and why)?

Re: Reporting written options on 8949
Posted by: Art, March 4, 2012 03:11AM
With written options that closed by purchase or expiration, the date you write is the sale date and the date you buy back or they expire is the acquisition date. Since they were not reported on Form 1099B they are form 8949 Type C.

Re: Reporting written options on 8949
Posted by: InTheMiddle, March 4, 2012 02:09PM
Well, that used to be how it worked, but I'm not sure that's still the case. The instructions for column (d) Date Sold say: "For stock or other property sold short, enter the date you delivered the stock or property to the broker or lender to close the short sale."

Writing an option could be considered selling the option short in which case it sounds like column (d) would be the expiration date or settlement date of the "Buy to Close" transaction since that's when the option is "delivered" to close the transaction.

Are you saying that writing an option is not a short sale and therefore has different rules than a short sale of stock or that I'm misunderstanding the instructions for column (d) for short sales?

Any references to statements in the Schedule D/Form 8949 instructions or Pub. 550 (or any other IRS documentation) that explains this would be appreciated. I want to be sure I have a clear understanding of the rules so I report everything correctly.

Re: Reporting written options on 8949
Posted by: Art, March 4, 2012 08:58PM
I'm not looking at the actual form right now and have not used the 8949 long enought to know which column letter is which. Which is why I used the language I did. What I said is correct.

Re: Reporting written options on 8949
Posted by: James99, April 1, 2012 12:29AM
In the Middle, I just wrote a post on this, and then saw yours. You certainly didn't get much help.

I'm not sure about the dates either, but I don't know how to even list the option. The brokerage is using the long name for the Bidu stock itself, followed by Jul 01 1, then by / 1416449UO. I don't know what this number is; it doesn't contain date, strike price or anything. I don't know if I should look up the formula for the new way to identify options this past year, as no one seems to use it on any form or software I tried.

Re: Reporting written options on 8949
Posted by: Bill Brown, April 1, 2012 04:58AM
James, no one is getting paid to answer questions on this forum and no one is required to pay for the answers they get. Also, no one is required to read any of the posts here, questions OR ANSWERS.

If it were me and I felt I wasn't getting value in excess of cost here, then I would look for another venue to post my questions. But, that's just me.

Re: Reporting written options on 8949
Posted by: James99, April 1, 2012 06:43AM
Bill, few people today have any concern about anyone but themselves. That is also glaringly obvious by nasty replies. People on this board seem particularly selfish and obnoxious. In response to your comment, it seems you only agree with the basic attitude displayed here as having nothing wrong with it, and THAT'S a pretty sad commentary on this age and the people who live in it.

Re: Reporting written options on 8949
Posted by: RichC, April 1, 2012 01:09PM
James, you are doing a superb job of being the pot who calls the kettle black. All you ever do here is nastily bitch and moan about everyone except you. And then you put on this ridiculous "help, help, I'm being oppressed" act when people take offense. You reap what you sow.



Re: Reporting written options on 8949
Posted by: RichC, April 1, 2012 01:21PM
As for the original question, before James felt the need to hijack another thread with another rant about how he is so put upon by the world, you do have an interesting point.

The instructions for column (c) (date of acquisition) say among other things: For stock or other property sold short, enter the date you acquired the stock or property delivered to the broker or lender to close the short sale.

And the instructions for column (d) (date of sale) say among other things: For stock or other property sold short, enter the date you delivered the stock or property to the broker or lender to close the short sale.

So strangely it looks like the IRS no longer wants the date the short sale is opened. Everything appears keyed to the end of the transaction

I went back and checked the 2010 Sched D instructions and the language has changed. In 2010 the date of acquisition instructions say to use the date the the property was delivered (not acquired) to close the short sale, and the date of sale instructions were to use the date the borrowed property was sold (so that's a big change).


Re: Reporting written options on 8949
Posted by: InTheMiddle, April 4, 2012 12:26PM
Rich, thanks for the reply. I think the instructions are lacking in this area. It does seem to me that the date a short sale transaction was actually opened is no longer reported anywhere, which seems a bit odd to me. Also, in a typical short sale, the stock is "delivered" to cover the short immediately upon settlement of the acquisition, so it would seem that the two dates would always be the same...but since we typically use "trade date" rather than "settlement date" for reporting trades, it's also possible that they want the trade date for the acquisition and the settlement date for the "sale" since that's when the stock is actually delivered to close the short. So in that case, the dates will always be 3 market days apart for stock. The latter seems to be my broker's interpretation based on the dates shown on my 1099. That's what I decided to go with on stock.

On options, the instructions are even less clear. About all that's said about the dates there is that if the option expires, the expiration date should be used (with "EXPIRED" in the appropriate value column) as before, but then it says "fill in the other columns as appropriate" with no further explanation in either the Schedule D instructions or Publication 550 instructions of what is "appropriate" for options transactions. Since they use the term "granted" rather than "sold short" when talking about writing options, I think they don't consider writing an option to be a short sale (which seems reasonable because you haven't actually borrowed anything to sell when writing an option) so I'm guessing that the new reporting rules for short sales don't apply to options.

In the end, for short sales of stock, I chose to use trade date of the buy to cover for the acquisition date and the settlement date of the buy to cover for the sale date (which matched the dates on the 1099 I received). For options, I used the trade dates for both the writing and buying back of the options (as we've done in the past) since my interpretation of the instructions is that writing options is not the same as a short sale and so in the absence of any guidance on the dates to use, I used the traditional trade dates of the opening and closing transactions.

I'm not sure that's right, but I'm hoping that as long as the values are right so the tax calculation is right, there won't be any problems if the dates are not reported the way they want them.

Time will tell I guess.



Sorry, only registered users may post in this forum.