I sold put options. The cost basis on my 1099 shows as a negative in the amount of cash I received. How do I properly reflect cost basis when it has to be 0 or greater?

[weprice]

Example: I sold put options and received $1,000 up front. When the options expired out of the money, I was able to keep the $1,000. In some instances, I received $1,000.00 up front, but then bought back an equivalent number of options for $200.00 and netted  $800.00. My 1099 properly reflects the gain, but the cost basis shows as -$1,000 since I received the cash up front. Turbo Tax requires me to show cost basis as $0 or greater. How should I properly reflect it? In either instance, I never actually paid out any money.

[DavidD66 · Accepted solution]

Instead of thinking of it as buy and sell the put option, think about it in terms of "opening" and "closing" the positions.  When you open the short position (sell to open), that is your acquisition date, and the premium you received is your proceeds.  When the put expired, or you bought it back (buy to close) that is your disposition or "sales" date, and your cost basis is either zero (expired) or in your example $200.

If you enter using summary totals by category, you won't have to enter sales and purchase dates.