Message Font: Serif | Sans-Serif
No. of Recommendations: 0
Mrs. Goofy has options on a significant number of stock options which must be exercised by April 1. We are not comfortable purchasing all of them, but have found a buyer for 2/3 of them at a price acceptable to a (well) qualified buyer, and to us. We would retain the 1/3 of the options (stock, once exercised) for ourselves, which would likely not be liquid for several years (private company.)

We would purchase the entire tranche, then "sell" 2/3 to this buyer. That would make our gain short-term, and taxed at a higher rate. Since the buyer has no interest in (nor ability in) selling the stock for at least a year, if we signed a letter of intent to sell him the stock in 2009, would that allow us to "hold" the stock and thereby achieve a lower cap gains rate, or does the fact that there is a letter of intent to sell make the sale a "today" sale instead of "next year", even though the stock is not conveyed until next year?

While I'm not sure whether your plan would work or not (it's not an area that I have any experience with), your analysis omits one very important factor. If you can use a letter of intent to retain the long-term gain character, then you have converted your buyer's potential gain (restricted purchase price vs. open-market sale price) from long-term to short-term. Your buyer might not be willing to offer as much if his tax liability increases.

Print the post  


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.
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.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! 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.