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>At 10:51 AM 7/6/01 -0400, Bob Fulks wrote:
>
>>Index-option profits are taxed like futures, I believe.
At 11:10 AM -0500 7/6/01, multitrak@xxxxxxxxxxxxxxxx wrote:
>Nope. Options are taxed as short term cap gains (taxed at the same rate as ordinary income). Futures still enjoy the benefit of the 60% long term - 40% short term cap gains split. The tax disadvantage of options is one reason (of many) that I do not trade them.
According to J.K.Lasser's 1997 book, Page 434:
Non-equity options and dealer equity options, which include options
based on regulated stock indexes and interest rate futures are taxed
like regulated futures contracts.
Later versions of the Lasser's book do not discuss it.
But the latest IRS Publication 550, page 38, says
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Section 1256 Contracts Marked to Market
If you hold a section 1256 contract at the end of the tax year, you
generally must treat it as sold at its fair market value on the last
business day of the tax year.
Section 1256 Contract A section 1256 contract is any:
1) Regulated futures contract,
2) Foreign currency contract,
3) Nonequity option, or
4) Dealer equity option.
Nonequity option. This is any listed option (defined below) that is
not an equity option. Nonequity options include debt options,
commodity futures options, currency options, and broad-based stock
index options. A broad-based stock index is based upon the value of a
group of diversified stocks or securities (such as the Standard and
Poor's 500 index). Warrants based on a stock index that are
economically, substantially identical in all material respects to
options based on a stock index are treated as options based on a
stock index.
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So I conclude that OEX and SPX options and options on SP and ND
futures are treated as are futures for tax purposes. I am not,
however, a tax attorney so suggest you get your own tax advisor to
give an opinion.
Bob Fulks
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