Writer of Put (Sell to Open)

[Giants25]

Hi, I sold to open a PUT on 6/27/2019 (received a premium) and it expired worthless on 1/15/2021 (the stock finished above the strike price).  

On my 1099-B for 2021 the gain was listed as 'Short Term' but since I held the option for over a year should it be listed as a 'Long Term Gain'?  I want to know if I should change how it is listed on Turbo Tax or leave it as is?  

Thank you.

[Mike9241]

you did a short sale.  under the tax laws, these are always short-term capital gains.

[fanfare]

when you sell an option that expires, the Date Acquired is the expiration date.

And the Date Disposed is the same date.

Your broker is probably reporting this wrong on your 1099-B.

Some do it wrong and some do  it correctly.

[Giants25]

Ok, so length of time does not matter (holding for 18 months) because selling a Put is consider a short sale?

[GeorgeM777 · Accepted solution]

Yes, the holding period on a short put does not matter.  If you were long the put, then your holding period would matter when deciding whether the sale of the long put was either short-term or long-term.  The IRS has stated the following with regard to long puts and expiration:

• If the option expires, its cost is either a long-term or short-term capital loss, depending on your holding period, which ends on the expiration date. 

Regarding a short put, the IRS has stated the following:

• If your obligation expires, the amount you received for writing the call or put is short-term capital gain.  If a put you write is exercised and you buy the underlying stock, decrease your basis in the stock by the amount you received for the put. Your holding period for the stock begins on the date you buy it, not on the date you wrote the put.  (underline and bold added)

The above quoted material was obtained from IRS Publication 550 at page 58.  Here is the link: Publication 550 Investment Income and Expenses

@Giants25