George Michaels, G2 FinTech
with Daniel Tilkin
16 February 2012
White Paper: Tax Implications of Straddles
Section 1092 of the tax code governs treatment of straddles. This paper covers ‘basic’ and ‘identified’ straddles, leaving ‘mixed’ straddles for a future discussion. Complete with examples, we discuss practical applications of 1092 as related to cost basis adjustments, holding period adjustments for lots tied to a straddle, and the basic elements involved in calculating disallowed losses. We explain how ‘covered calls’ are identified and excluded from straddle computations. The paper also touches upon some of the basic interactions between section 1092 and sections 1091, 1233, and 1259.
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