Capital Gains on Spread Closed at Year End

[Michael3516]

I entered into a bear-spread trade on SPY options.  I closed out for a small loss on the last trading day of the ‘23, but Ameritrade is only posting one leg (the gain) on my 1099, saying the losing leg will show up in ’24, the reason being  shorts are taxed when they are settled (Trade+2).   Since it’s a spread, I thought it should be taxed in the same year, since if not, then I have to pay tax on a large ‘phantom’ gain in ’23.

Here's the set up:

Nov 20, 2023

[A] Short SPY 400 Call

[B] Long SPY 401 Call

Dec 29,2023 (last trading day of the year)

- Close both legs

- In total, there is a small loss.

[A] Loss of $169k  (Ameritrade claims this should show up on my ’24 1099, since shorts are taxed on the day they settle (T+2)

[B] Gain of $150k   (this is showing up on my ’23 1099)

[DavidD66]

Your bear-spread was a strategy, not an investment.  The two individual option positions you initiated were the investments.  Each position could have been closed, while the other was left open.  When it comes to reporting option trades on your tax return, each individual security is taxed, not the trade “strategy".  Unless you can somehow get your broker to adjust your Form 1099-B to reflect the closing of the short position, you're stuck with a 2023 gain, and a 2024 loss.