- 12 -
short (February) position a before tax loss of
$25.60 per ounce. Your after tax gain on the long
contract would be approximately $19.52 per ounce,
and your after tax loss on your short contract
would have been approximately $12.80 per ounce, if
you follow the liquidation principles described in
the answer to question #9 above. The combined
after tax gain would be $6.72 per ounce, or
$672.00 net after tax profit per spread.
11. Would the same results be realized with other
choices of dates?
The results that would have been achieved with
other choices of dates would be different.
However, the principles are the same if these
conditions apply. (1) The contracts are closed
out after the expiration of the six months capital
gains holding period. (2) The contract on which
you have a gain is closed out in a way which will
qualify for capital gains tax treatment, and (3)
the contract on which you have a loss is closed
out in a way which will qualify for ordinary
income tax treatment.
12. Precisely how do I meet conditions (2) and (3) in
question # 11?
If there is a gain in your long position, you
should qualify for capital gains treatment by
going short in the same delivery month. If you
have a gain in your short position, you could sell
it to an unrelated third party and qualify for
capital gains treatment. If you have a loss in
either your long or short contract, you should
cancel it. If you do, your loss will be an
ordinary loss rather than a capital loss.
* * * * * * *
15. Will I be required to close out my long and short
positions simultaneously?
By no means. They are separate contracts. You
may choose to liquidate them in other ways. For
example, you may wish to actually take delivery of
the gold on your long contract and close out your
short position by offsetting it with an identical
long contract. Other combinations of liquidation
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