How to manually report options credit spreads in turbotax where the form only shows profit or loss realized in closed contracts? Should total proceeds be the profit?

[makeitreynes]

How to manually report options credit spreads in turbotax where the form only shows profit or loss realized in closed contracts? Note: Turbotax is not picking this 1099-b form up automatically. For each leg/line item, should total proceeds be the value under profit if positive. If positive, the cost basis as zero? Whereas, if negative, the total proceeds zero and the cost basis the negative value as a positive number? For example, here's a zero days to expiration credit spread in my 1099b Option symbol, Profit or loss realized on closed contract XSP 08/28/2024 563.00 C, $ 38.68 XSP 08/28/2024 564.00 C $ (18.32) Should the first sale be: total proceeds: 38.68 cost basis: 0 Should the second sale be total proceeds:0 cost basis: 18.32 Where in that one credit spread i made 38.68 - 18.32 = 20.36

[baldietax]

are these transactions presented separately in the 1099-B as 'regulated futures contracts' / Section 1256 Option Contracts etc... if so it's possible they should be reported on Form 6781 rather than Schedule D/Form 8949; in TT go to Wages & Income / I'll Choose What I work On / Investment Income - Contracts and Straddles and also check the IRS instructions for Form 6781.  Not a CPA and I've only had limited experience in this form but wanted to point you in this direction; I had a few SPY spreads last year which E*Trade reported as Section 1256.

[makeitreynes]

I only got a statement for 1099b from charles schwab. No other form. These are for options credit spreads, not futures. I did not get assigned on any since they're cash settled so it should be easier to manually file.

[baldietax]

yes not futures but some brokers designate certain option spreads as Section 1256 contracts - but the statement should show that clearly; so if they're just included as sales under regular 1099B sections, what's the issue, are they just missing cost basis?  Generally you would input each leg as tho they are separate and will get to the net gain/loss on Schedule D.

The short leg may have zero for the cost basis and falling under the "cost basis not reported to the IRS" i.e. non-covered category.  You may want to input these as "one by one" with the details rather than as a sales summary, that should help avoid having to mail more details to the IRS.  TT also doesn't handle short options well they provide all these drop downs and buttons, but if you select expired it doesn't allow you to input proceeds, so say they were sold either way, this doesn't matter as long as you get the right outcome on Form 8949 / Schedule D, and you have to input that leg was 'sold' on open date and 'acquired' on the close date etc.

Hope this helps.  If some other issue pls do post further.

[Mike9241]

we don't know what type of options you trade. certain options can be section 1256 contracts

see PUB 550 https://www.irs.gov/forms-pubs/about-publication-550 

but then Schwab so have identified them as such and reported accordingly. 

there would be a section on your composite 1099 labeled "1256 option activity"

open 1256 contracts, at year-end, are marked-to-market. 1256 contracts are first reported on form 6781 not schedule D. from there the gain loss is split and carried to schedule D 

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if you are a trader who has properly elected IRC 475(f) then mark-to-market reporting is required. the gain/loss for the year is ordinary income or loss reported on form 4797 line 10 (including 1256 contracts rather than reporting on form 6781) . if you are a trader who has not elected 475(f) or an investor, each leg that has been closed/expired by year-end is reported separately on form 8949 or schedule D. you would be subject to the wash sale rules