Still no clear instructions for Expired Sold-short Stock Options

[jimavera]

If an exchange-traded stock option is sold short and the option expires, the seller pockets the premium received.  The "Proceeds" (1099-B box 1d) shows the premium received when selling the options short, and the "Cost or other basis (box 1e)" is ZERO.

But TT (desktop) will not accept this.   If I change "Sold or expired?" to "Expired" it still stays there is an error.

There are many, many questions and half-answers about this, but no definitive answer that I've found.   HOW can imported option trades be fixed so TT will accept a zero basis (or "Expired")?

[ravi303]

I am also having issues related to sold put options at have expired. I do not get any error upon editing but if select expired (from sold or expired), the proceeds are becoming ZERO which is incorrect because proceeds are actually the premiums and having them as ZEROs will not match 1099-B. I have no idea how to fix this. Anyway when do you see an error, do it see it immediately upon editing or after final review? and what does the error say?

[jimavera]

ravi303 - Your are correct, "Proceeds" are (or should be) the premium received when selling the option, and "Cost" should be zero, since nothing was paid to close the short position.   The errors I see happen during Federal Review.

[DianeW777]

For expired options, it's quite common to enter sales proceeds of zero or nothing and then the cost basis to arrive at the loss. This is how it's been handled for many years. They should be edited after import to remove the errors or entered manually (understood not the answer most want to hear). Maybe one day the financial agencies and/or stock brokers will find a better way to handle options for import at tax time.

When you enter your options you can select they type of investment and the holding period as well as selection 'Something other than a date' to use 'Various' has the date acquired.

• Call options allow contract holders to buy assets at an agreed-upon price at a later date.
• Put options are financial contracts that let traders sell assets at a specific price by a certain date.
• Traders must decide whether to sell, exercise, or let their options expire as they get closer to the expiration date.

Go to the investment sales in question and make the necessary entries for holding period and acquired.

1. Search (upper right) for 1099b > Click the Jump to... Link > Edit next to the sale in question > make your changes
2. Continue to the screen 'Review this .... Sale'
3. Enter the Sales selection/holding period, Type Options, Description and then Something other than a date to select Various (unless you have the specific purchase date).
4. Continue to finish the sale.
5. See the screen image below based on which TurboTax version you are using.  In TurboTax Desktop you can select 'Expired'.

@jimavera 

@ravi303 

[jimavera]

@DianeW777Note that this Q. is about *written* i.e. SOLD SHORT option contracts which expire worthless.  That is different than buying an option but never exercising it.

The IRS instructions for 1099-B seem to me to say that it is correct for the PROCEEDS (box 1d) to be the premium received when writing (ie selling short) the option contract, and the COST is zero for expired options.  Note that exchange-traded options are now "covered".   Here is a quote from the 1099-B instr.:

"Closing transactions.

In the case of an option, a regulated futures contract, a securities futures contract, or a forward contract, a sale includes any closing transaction. A closing transaction is a lapse, an expiration, a settlement, an abandonment, or other termination of a position (which includes a right or an obligation under a forward contract, a regulated futures contract, a securities futures contract, or an option).

Example.

For an option that is a covered security, that also has a basis of zero in the option upon a closing transaction, enter -0- in box 1e."

[ravi303]

For expired puts with zero cost basis the data imported from 1099-B is correct with respect to dates, the sell date is the date when the put was sold which is box 1c, acquisition date is the date when the option expired which is box 1b. Note the date sold comes before the date acquired in these cases. These imported dates matches with 1099-B don't see a issue there the problem is when it asks for Needs review, there is a Radio button with two options "expired" or "sold", if you select expired proceeds will become zero (which seems incorrect) and it won't match what is reported on 1099-B. if we select "sold" then the proceeds amount remains intact (although option was actually expired). I was on call with the customer representative for hours explaining how options work and explaining the problem but even she was confused looking at the screen about which option to pick (not sure why turbotax makes a note of this), upon discussion for few hours we concluded that it is probably a good idea to choose "sold" because that would match the data reported in 1099-B. Not totally convinced with the solution but I guess there is no other choice at the moment.