Explain effect on investor current-period tax return

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Reference no: EM132853744

An investor seeking to hedge a stock position executes appropriate at-the-money call and put options. Premiums paid are £100,000 and received are £70,000. The investor's country taxes option premiums received as income at 40%, while option premiums paid increase the cost basis of the underlying.

Realized capital gains are taxed at 10%. What is the effect on the investor's current-period tax return based only on the information provided and assuming the asset is not sold in this period?

Reference no: EM132853744

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