CHAPTER 24The Impact of Taxes

We are neither tax accountants nor tax lawyers—and we plan to remain this way. Unfortunately, one facet of trading or investing with options is settling up with the taxman. (See Chapter 25 for our comments on trading options in tax-deferred accounts.)

Not only are taxes a fact of life, but the people who make the rules are forever moving the goal posts. Our comments here will be brief and limited to two topics, the possible special tax treatment of LEAPS and some general comments on options and taxes, and we will look at one “tax” strategy. Since we are talking about a moving target, check with your tax adviser to find out the latest tax rulings.

THE SWORD OF DAMOCLES

There has been talk (and more talk) in Washington ...

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