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Options and Taxes
#1
Great new area. I'm very inexperienced with options, but have always been interested.

For me a threshold question is taxes and accounting. For those of you who use options a lot, do you only do so in tax-deferred accounts? Am I right to think that if you used options heavily in a taxable account, it would be a giant hassle to track the trades and incoming premiums, not to mention the sell prices and long-term vs short-term capital gains, etc. etc.?

And am I right to think that pretty much all of that is a non-issue in a rollover or Roth IRA?

Thanks in advance!
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#2
That is correct. I used to be an active trader in a cash account and the accounting was a nightmare. Haven't done that in years. Now I do all of my options trading or other short term trades inside the IRA where there is no paper work. I probably would not bother in a regular account. I try to keep the trades and the numbers of MLPs down to a minimum in the cash account.
Alex
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#3
Thanks hendi_alex. Do you also know whether treatment is equally easy in either a rollover or a roth? That is, in both cases there is no tracking, accounting, or reporting to bother with?
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#4
My IRA is a rollover and have never had an issue. I don't see how there could be any tax consequences inside a Roth, but am not sure of the fine print related to such. I never would have thought that MLPs would have possible UBTI issues inside an IRA, so fine print does exist.
Alex
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#5
I do all my option trading inside my ROTH. No tax consequences and no messy record keeping.
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#6
(09-26-2013, 01:26 PM)TomK Wrote: Great new area. I'm very inexperienced with options, but have always been interested.

For me a threshold question is taxes and accounting. For those of you who use options a lot, do you only do so in tax-deferred accounts? Am I right to think that if you used options heavily in a taxable account, it would be a giant hassle to track the trades and incoming premiums, not to mention the sell prices and long-term vs short-term capital gains, etc. etc.?

And am I right to think that pretty much all of that is a non-issue in a rollover or Roth IRA?

Thanks in advance!

Not really a hassle. A simple Excel spreadsheet is all you need for your end.

Regarding the detail of it, that is no worries as your broker will send you detailed statements monthly and at the end of the year with everything that is needed for tax purposes so you don't need to sweat it at all. Just keep your money in, money out, and dates and that is enough to verify what your broker sends you.
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