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No. of Recommendations: 3
100 Warrant purchased 7/1/2015 for $1500 ($15/sh).
Adjusted strike price $32.
Stock price on exercise date $60.
Each warrant has a right to 1.01 shares (i.e. 100 warrants give a right to purchase 101 shares at an exercise price of $3200).


The gain on exercise is taxed at ordinary income rates. There are also potentially ST gains/losses that may occur on the exercise date.

Investment in warrants: $1500
Exercise price investment: $3200

Total investment: $4700

Value received at Exercise: $6060 (101 shares @ $60)

Gain on exercise that will be taxed at ordinary income rates: $1360

Any shares sold on the date to do the cashless exercise will probably have a small loss, assuming that there are some fees charged, and that loss will be a short term loss, since it occurred the same day you purchased the shares. If there aren't any fees charged, then there shouldn't be a gain or a loss, presuming that the sale occurs at the exercise price. If the sale occurs at a different price, like the average of the high and low, or the average of the open and close, then there would be the potential for a short term gain or loss. I would suggest confirming with Investor Relations what the price for the shares will be based on, and what, if any, fees will be charged.

The remaining shares that you are issued will have a basis of the exercise price, with a holding period beginning on the exercise date. If you hold them for at least 1 year and 1 day before selling, any gains/losses will be long-term. Sales prior to that will be considered short term.

Here's a site with that has a good explanation: https://finance.zacks.com/taxation-stock-warrants-7458.html

AJ
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