Question about ATX and Sch D, 8949

[TaxMan60601]

Have a client who made about a dozen transactions in the year - options sales, and you know, next to 'Form 8949 Box' drop-down menu, there is another one 'Transaction Type'. Now I am in concern now which code to use in ATX - 1 - Non-business gain or loss, or - 14 - Short sales. There is no 'Option sales' in the list.

Actually my question is what is this "14 - Short sales" for?

As always, thank you in adv for the priceless help.

[joanmcq]

If the transaction is a short sale, where the client 'borrows' Stock he doesn't have and sells it. If the price drops, he can buy the stock at a lower price to replace the borrowed stock, and make money. It's a bet that the price will drop. The acquisition date is thus after the sell date.

[taxxcpa]

If, by transaction type, you mean long-term or short-term, it is almost always a short-term sale even if he bought the option before he sold it. If he sold it short, either as a covered option sale or an uncovered option sale, it would always be short-term.

A covered option would be a situation in which he owned the stock on which he sold a call or a situation where he had sold the stock short and was selling a put option. Uncovered would be in the case he was neither long nor short the stock on which he was selling a put or call option.