How do I show covered call income on my taxes?
Best Answer
204 points
helpme answered one year ago …
Publication 550 covers this question. Gains or losses from options are reported on 1040 Schedule D. The sale date is the "sell to open" date and the sell price is the amount received. The buy date is the "buy to close" date and the purchase price is the buy price plus commission.
If the call expired without being exercised, the buy price is 0 and the entire amount received from writing the call is taxable as short term capital gain. Enter the expiration date in column B and “EXPIRED” in column E. The gain would then be entered in column F.
If the call is exercised and the stock called away, then the amount received from writing the call is to be added to the price received from the sale of the stock (column D).
