Options

Question 1

Grantee

Sales the option

Answer 1

The sale will result in a capital gain/loss if the asset is a capital asset

Question 2

Grantee

The option expires

Answer 2

It is a capital loss if the asset would have been a capital asset to the grantee

Question 3

Grantor

Grantee sales the option

Answer 3

No effect on the grantor due to sale.

If option is later exercised that will effect the grantor

Question 4

Grantor

The option expires

Answer 4

The expiration will be a s/t capital gain if the asset is stock, securities, commodities, or commodity futures.

Any other kind of asset will be ordinary income.

Question 5

Grantee

Option is exercised

Answer 5

The basis is the purchase price + the option

Question 6

Grantor

The option is exercised

Answer 6

The option is added to the sales price and the basis is subtracted to get the gain/loss amount. It is capital if the asset was a capital asset