Covered Calls Premiums in Roth IRA - Are they taxed and how?

alex

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Jul 17, 2021, 6:10:22 PM7/17/21

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How premiums received from selling Covered Calls inside an Roth IRA are taxed? And if yes, how? As regular income, where are they reported, ie 1099?
Thanks, Alex Turchina

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Stuart O. Bronstein

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Jul 17, 2021, 9:00:32 PM7/17/21

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alex <aturc...@gmail.com> wrote:

> How premiums received from selling Covered Calls inside an Roth
> IRA are taxed? And if yes, how? As regular income, where are they
> reported, ie 1099?

As far as I can tell, in general no IRA earnings are reported at any
time. They are just taxed as ordinary income when they come out of the
IRA. This also applies to capital gains - if income would be taxed as
long term capital gain if it weren't in the IRA, it's taxed as ordinary
income when it comes out of the IRA.

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JoeTaxpayer

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Jul 18, 2021, 6:26:14 AM7/18/21

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On 7/17/21 8:58 PM, Stuart O. Bronstein wrote:
> alex <aturc...@gmail.com> wrote:
>
>> How premiums received from selling Covered Calls inside an Roth
>> IRA are taxed? And if yes, how? As regular income, where are they
>> reported, ie 1099?
>
> As far as I can tell, in general no IRA earnings are reported at any
> time. They are just taxed as ordinary income when they come out of the
> IRA. This also applies to capital gains - if income would be taxed as
> long term capital gain if it weren't in the IRA, it's taxed as ordinary
> income when it comes out of the IRA.

Yes, all correct for traditional IRA. This is a Roth. Any legitimate
trading within the Roth is tax free, as are withdrawals, within the
rules of Roth.

John Levine

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Jul 18, 2021, 3:46:46 PM7/18/21

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According to JoeTaxpayer <JoeTa...@comcast.net>:

>Yes, all correct for traditional IRA. This is a Roth. Any legitimate
>trading within the Roth is tax free, as are withdrawals, within the
>rules of Roth.

It sure is. Peter Thiel put 1.7m shares of Paypal into his Roth in 1999, underpricing them
at 1/10 cent each (arguably underpricing them which would be illegal.) They're worth
$5 billion now, tax free.

https://www.theguardian.com/technology/2021/jun/24/billionaire-peter-thiel-5bn-tax-free-savings

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John Levine, jo...@taugh.com, Primary Perpetrator of "The Internet for Dummies",
Please consider the environment before reading this e-mail. https://jl.ly

Roger Fitzsimmons

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Jul 21, 2021, 8:01:25 PM7/21/21

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On Sunday, July 18, 2021 at 3:46:46 PM UTC-4, John Levine wrote:
> According to JoeTaxpayer <JoeTa...@comcast.net>:
> >Yes, all correct for traditional IRA. This is a Roth. Any legitimate
> >trading within the Roth is tax free, as are withdrawals, within the
> >rules of Roth.
> It sure is. Peter Thiel put 1.7m shares of Paypal into his Roth in 1999, underpricing them
> at 1/10 cent each (arguably underpricing them which would be illegal.) They're worth
> $5 billion now, tax free.
>
> https://www.theguardian.com/technology/2021/jun/24/billionaire-peter-thiel-5bn-tax-free-savings
>
> --
> Regards,
> John Levine, jo...@taugh.com, Primary Perpetrator of "The Internet for Dummies",
> Please consider the environment before reading this e-mail. https://jl.ly

I wrote some covered calls in my Roth a few years ago. I didn't "report" them in any way. It just folds into the account.