S.D. Admin. R. 20:06:19:06

Current through Register Vol. 51, page 67, December 16, 2024

Section 20:06:19:06 - Accounting procedures for the sale or writing of call and put options

Consideration for the sale or writing of a call or put option shall not be recognized as income at the time of receipt; the amount received shall be carried in a deferred account. Accounting procedures for call or put options sold or written by an insurance company must be in accordance with the following principles:

(1) If the call or put option is not exercised, treat the consideration for the option as income at the expiration date of the option;

(2) If the underlying security is sold through the exercise of the call option, treat the consideration received from the option as increasing the amount realized from the sale of the underlying security and include it in determining capital gain or loss;

(3) If the underlying security is purchased through the exercise of the put option, treat the consideration received for the option as reducing the cost basis of the security purchased;

(4) If the obligation under the call or put option is terminated because of a closing purchase transaction, treat the difference between the consideration received from the sale of the call or put option and the consideration paid in the closing purchase transaction as income or expense.

S.D. Admin. R. 20:06:19:06

13 SDR 75, effective 12/21/1986.

General Authority: SDCL 58-4-1, 58-27-7.

Law Implemented: SDCL 58-27-7.