my initial issue is whether or not a long call option on an MLP is a 1256 contract. I think that the option would be an equity option, not a nonequirty option (because it represents a partnership investment rather than a stock investment) so ask the broker what definition in IRC 1256(b) does that option meet. I put it this way because if long call options are 1256 contracts then short options on MLPs should also fall under 1256 ( I would think). My broker does not treat such short options as 1256 contracts.
if your broker is right then the investment in the MLP should be $5.50. the $1 you paid originally. the $2.50 you paid to buy the MLP and the $2.00 gain the broker says you have.
my "opinion" is you have a $3.50 cost basis for the MLP and no gain or loss on the option.
certainly what the broker reports is illogical because the books don't balance as they say in accounting.
