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Hmmm.. even though the LLC is cash basis, I'd think the investments it holds
would need to be valued or marked to market at year end. Hence, the expense
of the option would be offset by the intrinsic value of the short sale --
but what do I know ...maybe you've found the golden goose :-)
----- Original Message -----
From: "cwest" <cwest@xxxxxxxxxxxx>
To: "'Omega List'" <omega-list@xxxxxxxxxx>
Sent: Thursday, December 19, 2002 11:48 AM
Subject: a hypothetical tax question
> Imagine that an LLC buys deep in the money PUTs. It exercises them in
> the current year. That is, the LLC is now short stock. The cost of the
> PUTs is considered a current expense, and the short stock positions are
> considered liabilities. The LLC does its returns on a cash basis, not
> marking anything to market. What's missing from this picture?
>
> Colin
>
>
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