if you are an investor or a trader that has not made the 475(f) election
if you buy and it expires or you buy and then sell report as a capital gain on form 8949 (1099-B worksheet) in the year in which it expires or sold
in either case, report Long-term or Short-term based on the period held.
if you sell short and it expires or you sell short and buy the reporting is the same as above except the gain or loss will always be Short-term.
the wash sale rules apply to stock options unless you are a trader and made the 475(f) election. if you have, then you treat the gains and losses as ordinary gains and losses (except for those held for investment) that are reported on Part II of Form 4797, Sales of Business Property. Neither the limitations on capital losses nor the wash sale rules apply to traders using the mark-to-market method {475(f)} of accounting. at year-end, the market value of open positions is determined and gain or loss is reported for that year based on the difference between market value and proceeds or cost of the options.
