Record keeping for options and call trading
The acquisition date of the shares or units is the date you exercised the rights or options to acquire the shares or units. Answer 2 If you did not exercise the rights or options, you disregard any capital gain or loss on the sale or expiry of the rights or options.
If you exercised the rights or options before that date, you disregard any capital gain or loss you make when you dispose of the shares or units that you acquired. Answer 3 The shares or units you acquired when you exercised the rights or options are subject to CGT. The acquisition date of the shares or units is the date you exercised the rights or options. Answer 4 If the capital proceeds on the sale or expiry of the rights or options are more than their cost base, you make a capital gain.
If the capital proceeds are less than their reduced cost base, you make a capital loss. Rights or options you paid for The following steps apply to rights or options to acquire shares or units that you: Go to question 4 2.
Go to question 3 No: See answer 1 3. Go to question 5 No: See answer 4 4. See answer 2 5. Go to question 6 No: See answer 5 6. See answer 5 No: See our article on changing your tax return after it has been filed. Of course, if the prior year tax return has not been filed when the options are exercised, the prior year return can be done omitting the gain, eliminating the need for a later revision.
Usually, the taxpayer would benefit from filing the T1Adj. The only problem is that the Income Tax Act requires the options proceeds to either be added to the proceeds from the sale of shares call option , or deducted from the cost basis of shares purchased put option when the option is exercised. This applies even if the proceeds were taxed in a previous year, and no T1Adj was filed to reverse this. Therefore, double taxation will occur if the T1Adj is not filed.
During the year you sell 3 Put options of the same underlying and they expire out of the money. Based on the above table, each transaction should be treated as capital gain in the year sold. What if on the 4th option sold of the same underlying, you end up with the underlying shares?
Clearly you reduce the cost of the shares assigned by the value of the premium received on the 4th sale. BUT can you further reduce the cost of the shares by including the first 3 premiums collected if the shares are sold in the same year? Each sale of put options is a separate transaction, and not related to the next sale of put options. When the 4th option is exercised, the cost of the shares cannot be reduced by the premiums collected on the previous put options.
Each person's situation differs, and a professional advisor can assist you in using the information on this web site to your best advantage.