☰
✕
Sign In

Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
Level 3
posted Mar 2, 2024 7:52:59 AM

One broker has reported section 1256 contracts on a 1099-B for SPY options transactions and another has not. How do I proceed?

E*trade has decided to use a broader definition for Section 1256 contracts to include any options trade on broad index ETFs presumable to get their clients a bit of a tax break (60% long term capital gain no matter how long they are held).  I don't think this classification is appropriate for my situation.  Do I enter these in my 8849 as normal short term transactions at ignore what it says on the 1099 or just go with the flow?

0 2 2550
2 Replies
Level 13
Mar 2, 2024 9:39:52 AM

A couple of thoughts:

  • The facts are too limited for anyone to provide much guidance
  • I would call E*trade and discuss this with them to understand how they are determining this position
  • Bullet number 2 will help provide you with some understanding as to your comfort on filing position

Level 3
Mar 2, 2024 2:36:33 PM

Thanks for the advice.  I did contact trade, they said they have chosen to use a broad interpretation of the rule by considering SPY an index.  I sold SPY covered calls and cash covered puts.  No straddles or strangles, just options on an equity ETF.

 

So they also added that they have no intention of changing their minds unless the IRS makes them.  My return as it stands has some transactions that are box A, and some section 1256 contracts.  Just doesn't seem right to me.