figuring tax basis

S

starvingtrader

FACTS:

- You write a put.
- It gets exercised on Dec 18th, 2011.
- You are now long 1,000 shares @ $100 each ($100,000 of stock) and there is a $100 commission for the assignment. Your cost basis is $100,100.00.
- You sell half of the shares on Dec 31, 2011 and the other half the next day on Jan 1st, 2012.

QUESTION:

When figuring out the cost basis for your 2011 taxes, how do you allocation the commission to the 500 shares that are taxable?

Do you just assign all $100 to your 2011 basis ($50,100) since that is when it happened, and then none ($50,000) to next year's basis...

or do you allocation a proportional amount ($50,500 for each year) in commission.
 
Quote from starvingtrader:

FACTS:

- You write a put.
- It gets exercised on Dec 18th, 2011.
- You are now long 1,000 shares @ $100 each ($100,000 of stock) and there is a $100 commission for the assignment. Your cost basis is $100,100.00.
- You sell half of the shares on Dec 31, 2011 and the other half the next day on Jan 1st, 2012.

QUESTION:

When figuring out the cost basis for your 2011 taxes, how do you allocation the commission to the 500 shares that are taxable?

Do you just assign all $100 to your 2011 basis ($50,100) since that is when it happened, and then none ($50,000) to next year's basis...

or do you allocation a proportional amount ($50,500 for each year) in commission.
More...

I'm not a tax advisor or accountant, but the tax rate and commission should be based on the taxable amount, so $50,050 for each will be your taxable amount.

You cannot allocate disproportionate commission size on one trade and not pay tax on the later year, or vice versa.

Even if you wanted to, putting the tax in one year over the other would be an accounting error that every accountant would clarify for you.

Yes, you'll need to split commission and taxes if you were to do this.
 
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