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How are profits from short Put positions taxed?

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Mephistopheles:
I wrote a long term put and repurchased it out 1.5 years later. To my surprise on my realized gain&loss it shows as a short term gain, NOT a long term gain. I spoke to my broker (Merrill Edge) who reported the inquiry to the internal tax reporting department. 1 week later Merrill got back to me and said that when shorting options, regardless of when the position is closed or when it expires, it will always be taxed as a short term gain???

This is so confusing to me. I tried looking it up on the IRS website but can't find any resources confirming this. Did Merrill fuck up or am I in the wrong? I'm pissed because they will report this as a short term gain to the IRS, and if I manually change it on my tax return I'm afraid of an audit. Can anyone confirm for or against what Merrill is telling me?

wabuffo:
The gains on short puts (even from short LEAP puts) are always taxed at short-term rates in the US.

These are evil trades from the devils den of speculating rather than investing and the sinner must be taxed at ordinary income rates. 8)

wabuffo

Mephistopheles:

--- Quote from: wabuffo on October 24, 2019, 02:06:24 PM ---The gains on short puts (even from short LEAP puts) are always taxed at short-term rates in the US.

These are evil trades from the devils den of speculating rather than investing and the sinner must be taxed at ordinary income rates. 8)

wabuffo

--- End quote ---

Thank you, wabuffo. saved me the agony of finding it on the IRS website. Is this applicable to gain on shorting calls as well?

What a stupid peculiar rule

Can you point to the IRS page that describes this?

Cigarbutt:
^Since you're looking for boring prose, publication 550 is hard to beat:
Table 4-3, page 58
https://www.irs.gov/pub/irs-pdf/p550.pdf

"What a stupid peculiar rule"
I thought the stupidity was when Faust gave up eternal happiness for a few years of earthly delights.

boilermaker75:

--- Quote from: wabuffo on October 24, 2019, 02:06:24 PM ---The gains on short puts (even from short LEAP puts) are always taxed at short-term rates in the US.

These are evil trades from the devils den of speculating rather than investing and the sinner must be taxed at ordinary income rates. 8)

wabuffo

--- End quote ---

Trading futures are only 40% evil, even if held short-term, as you are taxed long term rates on 60% of your gain and short term rates on the other 40% of your gain!

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