Options Simplification and Clarification Act of 1986

[AI summary unavailable — showing source text] Options Simplification and Clarification Act of 1986 - Amends the Internal Revenue Code to revise the qualified covered call rules relating to the tax treatment of gains and losses of listed option contracts. Redefines a "deep-in-the-money option" as an option having a strike price which is less than 85 percent of the applicable stock price. Revises the special year-end rule to provide that qualified covered calls cannot be used for straddling purposes. Treats an equity option as a contract marked to market at the end of the taxable year. Repeals provisions denying such treatment to limited partners holding such marked to market contracts. Provides that any gain recognized upon the termination of certain options to sell ("married put") in a closing transaction shall be includible immediately as short-term or long-term capital gain depending on the holding period of the option. Provides that any loss incurred in such a transaction shall not be deducted but shall be reflected by adjusting of the stock with which the option was identified. Authorizes the Secretary of the Treasury to issue regulations to extend similar treatment to covered calls and straddles generally. Allows options …