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In June, Bubba bought 100 shares of XYZ at $35. In November, he bought a listed put in XYZ with a $35 strike price and a July expiration for a premium of $600. In April, Bubba exercises the put option and uses his stock for delivery.
What is his resulting tax consequence?
Suggested Answer: A
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a $600 loss. The strike price and Bubba's purchase price are the same. He has a $600 loss on the option for the premium he paid.
11 comments · newest first
JO
Joana
1 year ago
Wait, a $600 loss? That seems high for just a put!
PE
Percy
1 year ago
Agree, option exercise can complicate things.
AS
Ashleigh
1 year ago
Definitely need the market price to know for sure!
RO
Rosalia
1 year ago
I think it's a wash sale, so no tax impact.
NI
Nichelle
1 year ago
Bubba paid $600 for the put option.
MU
Muriel
1 year ago
I vaguely recall something about wash sales, but I’m not entirely clear if that applies here since he actually exercised the put.
HA
Harris
1 year ago
I think this is similar to a practice question we did on options and tax implications. The premium paid for the put might come into play here.
FR
Francesco
1 year ago
I remember something about how exercising a put option can affect capital gains, but I'm not sure if it results in a loss or not.
JO
Jose
1 year ago
I feel like the market price of XYZ at the time of exercise is crucial for determining the tax consequence. Could it really be that uncertain?
MO
Mose
1 year ago
Hmm, this one seems tricky. I'll need to carefully read through the options and think about the requirements for creating a distributed share.
JA
Janey
1 year ago
Hmm, I'm not sure about the download manager option. I think I'll go with the firewall and system updates instead.