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Author: mathetes Big red star, 1000 posts Old School Fool Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121256  
Subject: Re: Exercise of Non-Qualified Stock Options Date: 10/19/1999 5:17 PM
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I exercised some non-qualified stock options that were given to me by a former employer this month. One batch I received in 1996, the other in 1997. I know that this is going to affect my Federal Income Tax returns and, in fact, I think it will bump me into another tax bracket. Is there a formula, schedule, or some other easy way that will help me make an educated guess as to whether or not I'll actually (gulp) *owe* taxes in April?

beallan -- swallow hard, and take a seat.

Ready? The difference between the market value on the day you exercised and the price you had to pay is taxable income. Period. With Non-qualified options that's the end of the story. If you are guessing that it might put you into another tax bracket, there's little question as to whether you'll owe taxes; just a question as to how much. Had you still been working for this employer, they would (should) have taken a check from you and rolled the taxes into your W-2 at the end of the year. Since that's apparently no longer the case, you'll be responsible for the tax.

The best on-line resource of educating yourself on questions like this is www.fairmark.com. The author there, a tax attorney, also speaks and writes in normal English. Well worth a visit.

mathetes
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