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In mid-September, Bubba sells one XYZ February 50 call at $6. It subsequently expires without being exercised.
How is the premium taxed?
Suggested Answer: B
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the $600 premium is capital gain. That's simply how the tax law works.
12 comments · newest first
LI
Lindsey
1 year ago
Nope, it’s definitely ordinary income.
BE
Beata
1 year ago
Really? I always thought it was rolled over into another option.
HU
Hubert
1 year ago
Wait, I thought it could be a capital gain?
AN
Annabelle
1 year ago
Totally agree, it’s taxed as ordinary income!
FR
France
1 year ago
The premium is considered ordinary income.
OR
Ora
1 year ago
I vaguely recall that if the option expires, the premium is taxed as ordinary income, which aligns with option C. That makes sense, right?
NO
Noel
1 year ago
I feel like I read that the premium reduces the cost basis of the stock, but that was for a different scenario. This one seems tricky.
LU
Lura
1 year ago
I think I practiced a question like this where the premium was considered ordinary income if the option expired worthless. So, maybe it's C?
NI
Nidia
1 year ago
I remember something about premiums being treated differently depending on whether the option is exercised or not, but I'm not entirely sure how that applies here.
GR
Gregoria
1 year ago
This seems like a pretty standard content slot setup. As long as the slot is properly enabled and scheduled, I don't see any reason why the content wouldn't render correctly. I'm going to go with option A.
JU
Julianna
1 year ago
I remember we discussed how unrealistic targets can demotivate employees, so I'm not sure if making it tougher will actually help morale.
LI
Lizette
1 year ago
I think the answer is Urgent Change. Service improvements and system lifecycle management are more proactive, planned changes, whereas an urgent change would be something that needs to be addressed quickly and incorporated into the Service Management plan.