Section 0780-01-32-.07 - ACCOUNTING FOR TRANSACTIONS IN EXCHANGE-TRADED CALL OPTIONS(1) For the purpose of this regulation: (a) The price received for selling an exchange-traded call option shall not be included in income at the time of receipt, but shall be carried in a deferred account until one of the following occurs (a) the call option expires through the passage of time, (b) the company sells the underlying stock pursuant to the exercise of the call option, or (c) the company engages in a closing purchase transaction.(b) If the obligation under such call option expires through the passage of time, the price for the option shall be treated as income received at the time of such expiration.(c) If the underlying stock is sold pursuant to the exercise of such call option, the price received for the option shall be treated as increasing the amount realized upon the sale of the stock and shall be included in determining capital gain or loss.(d) If the obligation under such call option is terminated through a closing purchase transaction, the difference between the price received from the sale of the call option and the price paid in the closing purchase transaction shall be treated, at the time of such closing purchase transaction, as an addition to or deduction from income, as the case may be.(2)(a) The price paid for an exchange-traded call option shall be treated as a capital expenditure.(b) If such call option is sold prior to exercise; any gain or loss shall be treated as capital gain or loss.(c) If such call option expires without exercise, the expiration shall be treated as a sale of the call option on the expiration date, and the resultant loss shall be treated as a capital loss.(d) If such call option is exercised, the price paid for it shall be added to the price paid for the stock and thus treated as a capital expenditure.Tenn. Comp. R. & Regs. 0780-01-32-.07
Original rule filed January 21, 1976; effective February 20, 1976.Authority: T.C.A. §§ 56-1-701, 56-3-302, 56-3-303, 56-3-304, 56-19-114, 56-21-104, 56-23-110, and 56-23-111.