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Financial Planning / Tax Strategies
|Subject: Re: Feels Like a Wash - Don't Think so?||Date: 12/17/1998 10:22 PM|
|Author: MTBnd||Number: 7338 of 122998|
What a great comment - THANKS!! (Boy do I feel dumb!)
(...But remember that the AMT tax that you pay NOW will be used as a
credit in this circumstance, and will be used to reduce your regular tax in the future...when you
actually sell the shares.)
WOW. This was big. I went back & looked at a range of scenarios. I'm working with 3000 sh XYZ. Looking short-sighted I minimize taxes this year by selling (& immed. buying back) 2200 sh. However, if I look at a less optimal '98 tax (say, selling 1500 sh), I generate tax credits for future years. I can look at this as an 'investment' with Uncle Sammy... The one looking most interesting is to pay $925 more this year and generate $5700 in credits for future years. Can you say 600% return?!
(Remember that you have TWO different basis in the shares of stock. One for AMT purposes and
one for regular tax purposes. Please don't lose sight of that fact. It could be critical in your decision
OK - I think I understand this point too. Believe the argument to holding is to go for the 20% long-term rate, will have an AMT basis at $34 and significant credit available. Not sure how to think about this as I need to rise $10 from the current $24 before the long-term rates even become relevant. As I noted above - the credit is sweet.
Oh, and don't feel too sorry for me with the $10 drop -- I sold calls all year & covered the difference -- Not so Foolish - but I got lucky this time...
[[ What have I missed? Thanks in advance!]]
( The "gain" part, I'm guessing. But you also may be missing an opportunity of holding the shares for
long term, paying the AMT tax on the "timing" of the ISO, and then taking the AMT credit on the
actual long term sale of the shares.
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