Jackie Wheaton (Moore Stephens) answers a query on the tax treatments of option contracts for income taxpayers and corporation taxpayers.
Question
A client is considering acquiring a put option as a hedging transaction rather than as a speculative investment. A premium of approximately $300 000 will be charged to purchase the option. Will this be treated as a trading or capital matter and will the premium qualify as an allowable deduction for tax purposes? Also what will the position be if the option is not exercised?
Answer
The tax treatments of option contracts for income taxpayers and corporation taxpayers are different and are summarised as follows.
Income taxpayers
HMRC’s Capital Gains Manual at CG55402 confirms that: ‘It is a question...
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Jackie Wheaton (Moore Stephens) answers a query on the tax treatments of option contracts for income taxpayers and corporation taxpayers.
Question
A client is considering acquiring a put option as a hedging transaction rather than as a speculative investment. A premium of approximately $300 000 will be charged to purchase the option. Will this be treated as a trading or capital matter and will the premium qualify as an allowable deduction for tax purposes? Also what will the position be if the option is not exercised?
Answer
The tax treatments of option contracts for income taxpayers and corporation taxpayers are different and are summarised as follows.
Income taxpayers
HMRC’s Capital Gains Manual at CG55402 confirms that: ‘It is a question...
If you or your firm subscribes to Taxjournal.com, please click the login box below:
If you do not subscribe but are a registered user, please enter your details in the following boxes:
