1099-B Options (Put/Call)

[jaybird]

Hi everyone...first post. Just got my TTB a few days ago..and have been anxious to join in.

I just got done looking at a 1099-B - and in the supplemental info section (not reported to the IRS) there were numerous put/call options. A bunch of transactions (buy, sell, exercise, expired) with corresponding gain/loss for each. I've never seen this before. I am thinking Schedule D, or maybe section 1256 contracts Marked to Market... Form 6781. Anyone have any experience with reporting this stuff?


Thanks

Jay

[AZ-Tax]

I placed all of mine on Sch D and mailed in form 8453

Jay, before you enter anything from the 1099B, contact the brokerage firm who issued the 1099B and see if you can obtain a print out of all individual ST transactions including ST gains or losses and all individual LT transactions including LT gains and losses. Instead of entering each buy and sell individual transaction,I entered just one line in Sch D with the bottom line ST transaction and bottom line of all LT transaction from the brokerage print out. I then completed and U.S. Mailed form 8453 attaching the itemized brokerage print out. If you are not familiar with options, an option expiring is basically the same as if it was sold. Now my client had in excess of 100 trades.

[jaybird]

Thanks!

He had the detail - all short term. I did just as you said - netted on Sch D - mailed 8453.

Thanks for the help!

[Corduroy Frog]

Puts and Calls

I don't believe brokerage houses are required to report puts and calls on 1099-B. Most of them do provide detail of transactions, but the totals of puts/calls are not included on 1099B.

Jay welcome to the board. Lots of good info here, plus a smattering of occasional good natured humanity.

[Burke]

I don't believe brokerage houses are required to report puts and calls on 1099-B.

They aren't. I have no idea why this is so. But they still should be reported on Sche D.

[DMICPA]

6781 Form 1099-B

I am looking at a Future contracts 1099-B. Here is where it gets crazy.

Realized profit for the 2010 year is $22,000

Unrealized profit for 2010 is $75,000

The instructions say that you add the $22,000 and the $75,000 together and carry this total ($97,000) to the form 6781 and than split on Schedule D. I have read several of the instructions and they all say this. I am misinterpreting something?

I thought only recognized profits (losses) are reportable!!!!

How can my client pay the tax on a gain that there is no funds received?

For years I have been just reporting the realized gains and losses and disregarding the unrealized because you should not pay tax on something that is not sold yet.

This is big dollars, Help

[Gary2]

See Pub 550, specifically the parts concerned with Section 1256 contracts, which would include regulated futures contracts. The simple answer is that you're required to mark to market, but you get the benefit of 60% capital gains.

[DMICPA]

Futures contracts

Yes, I keep reading the rules on this but the logic from a cash flow standpoint is flawed because the taxpayer has to pay tax (even at favorable rates) on funds he never received. So if the gain is 73,000, the tax would be something like $12,000 so where is the money to pay this?

Also, the taxpayer tells me the value fell in January to $30,000. So He pays tax on $73,000 and gets to adjust the 2011 gain if he has not gone bankrupt.

[Gary2]

I found this court case which includes a discussion of the 1256 legislative history. My guess is that Congress had to apply it to all futures contracts, because merely applying it to straddles would be too difficult to enforce - but that's strictly a guess without really understanding all of the underlying issues.

But no one should be getting into the futures market unless they're prepared to lose their shirts, or worse. See http://www.imdb.com/title/tt0086465/.