The premium is never its own line: it moves into the basis or the proceeds of the shares, and the shares' holding period decides the character. Eight rows from Table 4-3, and what a cash-settled index option does instead.
For the writer, Publication 550 is explicit that the premium waits:
If you write (grant) a put or a call, do not include the amount you receive for writing it in your income at the time of receipt. Carry it in a deferred account until: Your obligation expires; You buy, in the case of a put, or sell, in the case of a call, the underlying stock when the option is exercised; or You engage in a closing transaction.
(IRS Publication 550). For the holder, If you buy a put or a call, you may not deduct its cost. It is a capital expenditure.
When shares change hands, the premium goes into the shares.
| Event | You are the | What Publication 550 says |
|---|---|---|
| Call exercised | Holder (you bought the call) | Add the cost of the call to your basis in the stock purchased. |
| Call exercised | Writer (you sold the call, assigned) | Increase your amount realized on the sale of the stock by the amount you received for the call. |
| Put exercised | Holder (you bought the put) | Reduce your amount realized from the sale of the underlying stock by the cost of the put. |
| Put exercised | Writer (you sold the put, assigned) | Reduce your basis in the stock you buy by the amount you received for the put. |
| Call expires | Holder | Report the cost of the call as a capital loss on the date it expires. |
| Call expires | Writer | Report the amount you received for the call as a short-term capital gain. |
| Put expires | Holder | Report the cost of the put as a capital loss on the date it expires. |
| Put expires | Writer | Report the amount you received for the put as a short-term capital gain. |
Every row is verbatim from Table 4-3, "Puts and Calls", in Publication 550.
Your holding period for the stock begins on the date you buy it, not on the date you wrote the put.
(Pub 550). Selling the assigned shares eleven months later is short term.
For an assigned call, The gain or loss is long-term or short-term depending on your holding period of the stock.
The premium follows the shares, and the shares' term rules.
If you have held the underlying stock for 1 year or less at the time you buy the put, any gain on the exercise, sale, or expiration of the put is a short-term capital gain.
(Pub 550), because buying a put is generally treated as a short sale.
If a call option you sold was exercised and the option premium you received was not reflected in the sales price shown on the Form 1099-B you received, enter the premium as a positive number in column (g) of Form 8949 and enter 'E' in column (f).
(Pub 550). tastytrade describes the folding on its side: The option contract itself does not report separately, it is rolled into the cost basis or proceeds of the resulting stock position.
(tastytrade).
Whether your broker folded it is a thing to check, not assume.
No shares move. Robinhood: Index options cannot be exercised or assigned early. If they're in-the-money based on the settlement value on expiration date, they're automatically exercised or assigned. Index options are also settled in cash, meaning your account will be debited or credited the corresponding settlement amount.
(Robinhood). For a
Section 1256 contract the settlement is a termination by exercise or being exercised, by assignment or being assigned, by lapse, or otherwise
(1256(c)(1)), so it lands in the year's 60/40 aggregate: Pub 550's own
example has a $4,000 option expire and the buyer recognize a short-term capital loss of $1,600, and a long-term capital loss of $2,400
.
Which roots are Section 1256 is its own page.
This is the defect the product was built to remove. A broker export is an event log, and a journal that reads it as a list of trades turns an assigned put into a closing buy at price zero and loses the premium that belongs in the shares. FillStub's atom is the contract and its chain of events; an assignment produces a share lot linked to the option that produced it, with the premium in the lot's basis or proceeds exactly as the table above says, and the lot's holding period starting on the assignment date. A cash-settled index option is settled in cash, as one event, with no phantom share position.
Not tax advice. Facts on this page were read from the linked sources on 2026-09-13; the law and the forms change by year, and a preparer reads your own facts. FillStub produces a worksheet from your broker export, and nothing is filed.