Tax implications for Covered Calls on the US Markets

[jamieredhands]

Hi everyone!

I'm new here as I've been trying to find a place to ask some questions as the information my accountant is giving me is concerning.

I have been doing covered calls on the US markets using the Interactive Broker platform since October last year.
My account is now telling that each sale of a stock is a capital event and therefore each sale needs to be entered on my companies yearly tax return.

As this will be a lot of trades, she is telling me that my tax return bill could be quite large.

I honestly just assumed (i know its a bit naive) that I could give my gross profit loss to the accountant at the end of the year base on what I had converted back to AUD and pay tax on the profit after expences.

Has anyone had experience in the or know a different way to enter this kind of thing? Or can give me some insight on any of it?

Thanks in advance!

 

[wayneL]

Hi everyone!

I'm new here as I've been trying to find a place to ask some questions as the information my accountant is giving me is concerning.

I have been doing covered calls on the US markets using the Interactive Broker platform since October last year.
My account is now telling that each sale of a stock is a capital event and therefore each sale needs to be entered on my companies yearly tax return.

As this will be a lot of trades, she is telling me that my tax return bill could be quite large.

I honestly just assumed (i know its a bit naive) that I could give my gross profit loss to the accountant at the end of the year base on what I had converted back to AUD and pay tax on the profit after expences.

Has anyone had experience in the or know a different way to enter this kind of thing? Or can give me some insight on any of it?

Thanks in advance!

Disclaimer: Not an accountant, so don't take this as advice.

Yes, each closing deal, whether a stock or closing out an option position is a taxable event, and how treated will depend on your status as a trader or not. The taxation status should be a consideration when either allowing assignment or closing out the short call option.

For instance, closing an in the money short call, rather than allowing assignment, in that instance will result in a tax loss. That may be preferable, depending on how you intend to go forward with that stock.

 

[KevinBB]

Why don't you just print your IB statement for the period involved? The statement will summarise all the transactions nicely, so your accountant won't have to go through each transaction one by one. Its the easiest way.

If your accountant won't look at your IB statement, then get another accountant.

KH

 

[jamieredhands]

Why don't you just print your IB statement for the period involved? The statement will summarise all the transactions nicely, so your accountant won't have to go through each transaction one by one. Its the easiest way.

If your accountant won't look at your IB statement, then get another accountant.

KH

Yeah thanks, thats what i thought would be the case, hopefully its not a drama with them. Appreciate your help!

 

[wayneL]

Disclaimer: Not an accountant, so don't take this as advice.

Yes, each closing deal, whether a stock or closing out an option position is a taxable event, and how treated will depend on your status as a trader or not. The taxation status should be a consideration when either allowing assignment or closing out the short call option.

For instance, closing an in the money short call, rather than allowing assignment, in that instance will result in a tax loss. That may be preferable, depending on how you intend to go forward with that stock.

I didn't read OP very well, did I

Still worth considering your tax implications and *how you close out trades

 

[jamieredhands]

I didn't read OP very well, did I

Still worth considering your tax implications and *how you close out trades

Oh definitely man!
Sometimes I set the strike price below my buy price if its close and the premium is high enough.

One other question I have, is when the buyer of the call pays a premium, is the premium i receive subject to GST?