Options and Wash Sale :)?

Question

(If I remember the data right, which I am not sure, and I am not sure what the question is asking)

1.Which options are deemed?

I

Long Jan 60

Short Jan 50

II

Long Jan 60

Short April 50

III

Long Jan 50

Long Jan 50

IV

Short Jan 60

Short April 60

A I II

B I IV

C II III

D II IV

2. Wash Sale:

I Encourage investors to keep stocks for more than 30 days

II Disallowed a tax loss on stocks which were held for less than 30 days?

Which one is the right answer?

Thanks:)

Answer 1

I don't understand question 1.

Question 2, neither answer is correct.

A wash sale does not "disallow" the loss.  It "defers" the loss.  If you take a loss and then buy the stock back within 30 days, the loss is used to adjust the basis of the second purchase.

Answer 2

<<<(If I remember the data right, which I am not sure, and I am not sure what the question is asking)

1.Which options are deemed?>>>

The answer would depend on what complete question is.

If the question is "Which options are deemed substantially identical for wash sale rule purposes" see

http://www.fairmark.com/capgain/wash/wsi...

and

http://www.fairmark.com/capgain/wash/wso...

If the question is "Which options are deemed offsetting for straddle rules purposes" you need to specify for each options position if it consists for call or put options.

<<<2. Wash Sale:

I Encourage investors to keep stocks for more than 30 days

II Disallowed a tax loss on stocks which were held for less than 30 days?

Which one is the right answer?>>>

Neither answer is right. For wash sales the 30 day period is the amount of time from when a position is closed for a loss to the time the position was reestablished. It does not matter how long the position was held.

There is a good series of articles on the wash sale rule at

http://www.fairmark.com/capgain/wash/ind...

which will probably answer your questions.