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Author: quanci Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2049  
Subject: Stock Options Date: 11/13/2007 2:40 PM
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I have stock options at a company I worked for which expires a few years from now. I want to invest the money without the tax implications. Is there any way I can transfer the funds to an account so as to avoid the taxes and if so, where do you suggest I put the money for retirement. I already have an IRA and a 401K and I don't want to spend the money frivolously -- it is quite a sum.

Thanks in advance
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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: 2045 of 2049
Subject: Re: Stock Options Date: 11/13/2007 8:03 PM
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quanci: I have stock options at a company I worked for which expires a few years from now. I want to invest the money without the tax implications. Is there any way I can transfer the funds to an account so as to avoid the taxes and if so, where do you suggest I put the money for retirement. I already have an IRA and a 401K and I don't want to spend the money frivolously -- it is quite a sum.

You don't say whether the stock options are ISO or NQ in nature. It doesn't make any difference to the primary thrust of your question, but the tax consequences of dealing with those two types of options are quite different.

The basic answer to your question is "No, you can't avoid tax implications." When you do exercise the options (assuming, of course, that they are above water when the time of expiration approaches), you are receiving real compensation value ... and that is taxable. The question is whether the options are NQ, in which the value is immediately taxable as ordinary income, or ISO, in which case --- if you buy and hold --- you'll pay some AMT (maybe quite a bit) based on the "preferential income" value ...

For more detailed answers, let me refer you to www.fairmark.com, where Kaye Thomas, a tax attorney with specialization in stock options, provides a wealth of information. (I'm simply a satisfied user, for many years now, of his site...)

mathetes

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