Thank you Champ @Mike9241 !! Is there any IRS link that deals with this situation? I went into panic mode with the exact same worry as described by the original questioner here.
I sold a put credit spread (Sell 12.5/Buy 10). On expiration date the underlying was trading at $10.1, so I got assigned on the $12.5 leg and the $10 leg got exercised. I had sold the spread 3 months ago for 1.41. Want to be sure that the $12.5 "income" is not what I am taxed against because in reality I have lost 2.5 - 1.41 = $ 1.09 per contract.
