Anyone have stock sales, wash sales, sold equity options? (sell, IRS, expiration)

[howard555]

Example:
Buy 100 shares of XYZ at $20.50.
Sell 1 monthly covered call ($20 strike price) for $1.00.
The stock is above $20 on expiration day, so assignment occurs.
The stock sells for $20.00.

On the stock it apears to be a loss. And if this same stock was bought again 2 weeks later, then the above stock sale would be a wash sale, and the loss of 50 cents per share is not allowed.

But, the $1.00 from the sold, covered call, makes the entire transaction, actually a profit not a loss.

How do you report the proceeds from the covered call option?

Assuming the stock is bought back a couple weeks later, the loss on the stock should not be "disallowed" as a wash sale, because the $1.00 from the option makes it a gain of 50 cents per share.

Thanks.

BTW I've called the IRS and well, that is a problem in itself.
No offense to anyone who works for the IRS.

[ragnarkar]

I'm sure the stock and the option on the stock are separate entities.

It's no different than if you shorted a $1 stock and that stock went to 0.. you can only deduct the gains against that loss according to the wash rule.

I'd call your broker to see if they have any knowledge on the subject or read about wash sales and options: Wash Sales 101

[howard555]

thanks