Your $5k capital gain will be offset by the carryover loss and you will pay no taxes. IOW, the $5k will reduce your carryover loss to $12k and you will be able to utilize another $3k deduction as well.


Assuming that this is the U.S. then if your name is not on the brokerage account then you can neither be taxed nor can you deduct the loss. Your father's social security number is what the broker uses for reporting the transactions to the IRS. Per your comment, he will be able to carry over that loss to the next year. Fairmark.com provides an explanation ...


If you buy the call back before expiration, the $4,000 will be considered a short term loss regardless of the length of time that the option position was open (short sales are treated as short-term even if they were open for more than one year). It might have been a good idea to either cover the short call before it appreciated so much or to have rolled it ...


Yes, this is a net short term capital loss deduction of $900. FWIW, if you're going to chase short option premium, sell credit spreads so you can avoid large losses like this.

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