Hello,

Suppose Investco LLC purchases $10,000 in various call options (on various underlying stocks) that will expire within the tax year. Most expire worthless, for a short term loss of $8,000. The remaining $2,000 worth of options purchases are exercised, and the underlying stock (in ABC corp) is held for more than one year.

Can the individual owner of Investco LLC deduct the entire $8,000 against ordinary income, and still expect to pay the reduced capital gains tax rate on any gains for the ABC stock that was held for more than one year?

Thanks in advance,
lukedog