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MrMuchimi
3 years ago
15

A customer buys 100 shares of XYZ stock at $43 per share. The customer then sells 1 XYZ $45 Call contract for a premium of $500.

The call contract expires unexercised. After expiration, the customer's cost basis in the XYZ shares is:________
Business
1 answer:
tigry1 [53]3 years ago
6 0

Answer:

$4,300

Explanation:

Since the call expired, the $500 premium must be reported as a short term capital gain. Short term capital gains are taxed in the periods that they occur, so they do not affect the basis of the stocks. It is something similar to dividends, if you receive dividends they will be taxed as short term gains = ordinary income, bu they do not affect the stocks' basis.

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