Message Font: Serif | Sans-Serif
UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121585  
Subject: Re: Option tax question Date: 4/22/2005 4:46 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 2
I'm thinking of exercising some of my stock options (type: ISO).

OK. ISO's. There's some different rules for ISOs. Reading ahead, I suspect you are not aware of them.

The option price is about $5 and the current market value is $15.

OK. Typical position for an ISO.

Say, I want to exercise 1000 shares and hold the stock for awhile.
So, there will be taxable $10,000 cap gain.

Wrong. If you exercise and hold the stock, there is no current taxation for regular taxation. For AMT purposes, the $10,000 is ordinary income, and the basis in the stock you hold is the $5k option price plus the $10k of ordinary income you need to recoginze.

If you do NOT hold the stock for the required period (help - is that one year or two? Or something else?), the $10k will become ordinary income for regular taxes as well. And your basis will be adjusted to $15k. Then your gain or loss is calculated from there.

However, if you play the game and hold the stock for the required period, the $10k of current discount is converted to captial gain, and is recgonized only when you sell the stock.

If I have lost $5,000 in stock xxxx, can the loss offset the gain from the option so that the total cap gain becomes $5,000 ?

As mentioned above, you've got to hold the stock long enough to make the gain a capital gain. If you do that, then yes, the gain can offset other capital losses.

There's some info here in our FAQ about stock options. The link is at the top right of the page. You might also check out , where there is an extensive and very good discussion of stock options.

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev Thread | Prev | Next | Next Thread


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Looking at Currency Ratios
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.