How to report option spread on Sched D when both legs exercised?

Your cost for the shares purchased was the strike less the premium received for the short put.

Your proceeds for the shares sold was the strike less the premium paid for the long put.

The fact that there was a bear spread is irrelevant. Each leg is taxed on its own.

Seth

So I only show the stock sale (using the adjusted basis/proceeds) and don't show the options at all?

-- Rich Carreiro snipped-for-privacy@rlcarr.com

Seth - I want to be sure I understand clearly. I'd expect this to appear on schedule D as one transaction, a sell/buy, as it was a bear spread, but still one transaction. When you say 'each leg taxed on its own' are you suggesting this look like two separate transactions on the form? Joe

I believe the treatment for an exercised option folds it into the stock; consider an exercised call, on which you hold the stock for years. There's no taxable event when the call is exercised, your basis for the stock is the cost of the call plus the cost of exercise.

So yes, the options are folded into the stock transactions.

Seth

Yes. The Instructions for Schedule D indicate that the sort of instruments the IRS expects on each line is one option or one stock, not "bear spread Stock Date 2 strikes".

Seth