The sales proceeds is actually the selling price for the Call option (should be a positive number).
The cost basis is the original purchase price upon acquisition.
My broker (eTrade) sent me a 1099 with net trade amount as proceeds for options trades. This is how they said the IRS wanted it reported. it was a change this year. TurboTax will not allow entry of a negative proceeds. Will TurboTax be fixing or do I enter buys and sells, but if I do that, is there an audit risk since it does not match the 1099.
As long as the net from your buy and sell entry equals the net on the 1099 all will be good.
To report an expired covered call transaction, enter the money received under Sales. Your Cost will be zero. And it is most likely a short-term transaction (less than one year between the sale and the expiration dates).
Option write, expires:
Since you are short,
The acquired date is the date you closed the short sale or it expired.
Date Disposed is one business day after Date Acquired (options settle in one day)
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IRS says: Enter "Expired" in 8949 column e) cost, but Turbo Tax won't let you do that directly so you have to go through the "Add More Details" screen and select "Expired". Last I tried, this had no effect either.
I add "Expired" in the description.
Your gain is the amount you received and it is a Short Term Capital Gain. Always.
If you are a covered short or not it doesn't matter.
I buy and sell stock options. My broker is Fidelity and I use the TurboTax import feature as I have over 2000 transactions for 2021. After importing the data from Fidelity and completing my Federal Taxes my Federal return has no errors. However, after completing the Massachusetts return and running the error check I have 217 errors on the Massachusetts Cap Gain/Loss Worksheet with the same error, Gross Sales can not be less than 0. I hadn't touched these transaction as I simply used the Import feature to download into my Turbotax return.
After investigating these transactions I found these are all covered calls where I sold an option as part of the covered call but the stock price rose and I had to buy back the option I sold at a loss. For example I sold a Fedex option at 250 but had to buy it back at 500 which resulted in a 250 loss. The Federal Return on the 1099-B Worksheet records the Sale Proceeds as -250, cost 0 and the Gain/Loss of -250, no errors and I have 217 of these transactions. On the Massachusetts Cap Gain/Loss worksheet the data gets imported as a Gross Sales Price of -250, Cost Basis 0 and a Gain/Loss of -250 but I get the error the Gross Sales Price can not be less than 0.
I could manually update the 217 transactions by changing the Gross Sales Price to 250 and the Cost to 500 so that it ties out to the -250 but that will be a lot of work on my part. Is this a known bug? Did I do something wrong during the Import? If I have to edit the Massachusetts Cap Gain/Loss Worksheet the Gain/Loss column will tie back to the Federal Worksheet but the Sales Price and Cost basis will not. How do I fix this issue?
John Kirk
[phone number removed]
First click to go on and see if TurboTax will proceed.
many flagged items are just warnings.
So do we leave the cost basis as 0 and the proceeds as a negative number?
Does this loss offset your gains in the TurboTax calculations this way?
I'm not ready to do that I case I can't get back to the screen again. Looking for an answer on how to enter selling covered calls and buying back to close them to make sure the math works regardless of whether I can click past the reviews.
Anyone know?
Selling calls I can enter as sold for proceeds of X with a cost basis if 0.
Buying to close a call is more difficult. TT puts a negative dollar amount in the proceeds box and 0 in the cost. Should the dollar amount I actually spent to close the position be in the cost with 0 in the proceeds?
"Buying to close a call is more difficult. "
why?
If you close a short sale your cost is the amount to pay to close the position.
your proceeds is the amount you receive to open the position.
Neither of these is a negative amount; real dollars are involved.
"Report the difference between the amount you pay and the amount you received for the [put or call] as a short-term capital gain or loss". (shorts are always short term transactions.)
I don't understand why brokers put negative proceeds amounts in your 1099-B.
For instance, TD Ameritrade does it that way. And others, like your broker.
This makes sense but the broker reports 2 transactions, the sell to open and the buy to close.
Are you suggesting to delete one of those transactions and net the amounts together to report the difference?
If there is a net loss, which field do you add the negative number to?
Box 1d - Proceeds
Box 1e - Cost or other basis
Let's say I have a sell to open and take in $50 premium, then a buy to close and pay out $60.
The broker lists 2 transactions for these that TT automatically uploaded. The proceeds for the buy to close is listed as -$60.
In the example you provided, the tax result would be the same if you chose to report this covered call option trade as one transaction. As one transaction, your purchase price would be $60 and your sale price would be $50, for a loss of $10. In TurboTax, reporting both transactions, the net loss is the same at $10.
Exact same issue I have. Federal is fine. Massachusetts has issues. I am snail-mailing it in instead of e-filing.
Most of these posts missed the key ask and that is how best to file the S2O and B2C. The 1099 shows 2 transactions but recommendations here have been to report one transaction. Does it not matter that the transactions on my return would be different than the transactions on my 1099?
"buy to close", if listed separately from "Sell to open" for the same trade is just wrong.
You have to combine those amounts into one short sale transaction.
See my reply above for how to report a short sale correctly.
OR
you are looking at and jumbling two different trades..
this post is talking about selling a call option, when you write the contract. so the cost basis has to be zero. there is no cost, only gain. The original poster is describing a work-around for a glitch in the turbo tax software. Would love it if you fixed this