![]() The IRS often refers to these options as "section 1256 contracts." This refers to options that be traded on the open market but are contracts on something other than equities or ETFs, such as commodities, futures, or broad-based stock market indexes. If a substantially identical security is acquired within 30 days before or after the sale occurs, the loss is disallowed and the basis is transferred to the new position. The same wash sale rules that apply to stock also apply to stock option trades. The idea behind the straddle taxation rules is to prevent investors from deducting losses before an offsetting gain is recognized.
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