Option trading in 2008. Probably about 50 trades with $10K. Made about $7K. Pulled principal (10K) in fall and had all earnings (7K) in other options on 12/31/08. Current value of option on 12/31/08 was only about 2K. What do I pay taxes on, 2K or 7K? Thanks. DB
With rare exceptions, and assuming you do not have mark-to-market status as a trader which is unlikely, you pay taxes for 2008 only on positions that were closed out in 2008. So, probably on the 7K given what you've described. You will want to pay by Jan 15, 2009 in most cases. When you file you will have to identify each position and its gain/loss and report those.
(I am not aware of exceptions to this for micro-traders, but perhaps others here have relevant experience.)
Steve
OK, so let's say I pay taxes on the 7K for 2008. If, this year, I close out all the positions for 2K, do I get to deduct 5K from my 2009 W-2 earnings (if there's no short-term capitol gains)? DB
If you have no capital gains in 2009, and 5K of capital loss, there's a 3K limit on the capital loss you can report in 2009. The other 2K of loss gets carried forward to 2010.
Steve (not a tax professional)
Not unless the $3000 capital loss limit rule is repealed. Assuming no other transactions, you'd have a $5000 capital loss. You take (no choice) $3000 of that against your other income (including wages) and carry the remaining $2000 of loss to 2010.
-- Rich Carreiro snipped-for-privacy@rlcarr.com
I guess 3K is better than nothing. Seems I should have liquidated on 12/31! Thanks guys! DB
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