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Financial Planning / Tax Strategies


Subject:  Re: Taxes on '97 Stock Option Date:  4/7/1998  11:39 PM
Author:  ronsmom Number:  3318 of 127533


Think of your stock option exercise as two separate transactions:

1) First, you purchased the shares, and paid taxes on the difference between the option price and the market price. This mean that going forward, your cost basis for these shares will be the market price at the time of exercise, and future gains in the stock price will be treated as capital gains. The gain and taxes paid at the time of the exercise were reported on your W-2.

2) Next, you sold the shares. The cost basis at the time of the sale was the market price at the time you exercised the options, and your broker reported the proceeds of the sale to the IRS, as required. This would be the case whether you sold the shares on the same day, or at a later time - and the sale should be reported on schedule D.

Hope this helps.
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