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Does anyone know how to account for wash sale that attached based on purchasing options where the last transaction was the purchase of an option that expired worthless? The issue is that there is no subsequent sale outside of the 30 days covered by the wash sale rule and, therefore, no transaction to which to apply the higher basis from the disallowed wash sale.

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If I follow your question, there was a loss, disallowed via wash sale due to the purchase of an option. The option takes on the loss as an increase to its basis, and when it expires, it's reported. The option transaction adds the loss to its purchase cost and the sale is still zero. That transaction allow the option owner to take the loss.

  • An option lapsing as worthless is, for tax purposes, equivalent to selling it for $0. – David Schwartz Jul 19 at 4:48
  • “The sale is still zero” - didn’t I say exactly that? – JoeTaxpayer Jul 19 at 7:31

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