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Education, Jobs & Professions / Employer-Granted Stock Options


Subject:  Re: Exercising, Selling, Holding Date:  2/6/2008  12:01 PM
Author:  markr33 Number:  2049 of 2049

Still, despite the higher tax burden, many people choose to perform "same-day sales" as you have done to eliminate the risk inherent in holding large chunks of stock in their employer.

There is one way to limit this risk, and to enjoy the benefit of preferred capital gains income tax rates, if you own other long-term shares. It is a simple technique of exercising and holding as they vest, but selling an equal amount of other long-term shares (or perhaps more than an equal amount to also cover the taxes due). Obviously, and as stated earlier, depending on how the stock appreciates or depreciates, you may or may not save on your overall tax bill. And, of course, the tax due on the difference between the strike price and the market value at exercise will always be taxed as ordinary income for NQSOs.

I also think that some companies will permit you to "turn in" other shares you own to cover the exercise cost (though probably not the taxes). It's all in "Consider Your Options" with lots of good examples.
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