Message Font: Serif | Sans-Serif
No. of Recommendations: 1
From a tax perspective I am better off selling the warrants for LTCG than exercising to get ordinary income. Since some of my qualified dividends and LTCG are currently taxed at 0%, any additional ordinary income will also push up the same amount of QD & LTCG to the 15% bracket.

I would agree with your analysis. I would say for most people, even those already having to pay more than 0% on their LTCG and QD, it probably makes more sense to take a LTCG on the warrants, and then, if they actually want to be in the stock long term, buy the stock with their proceeds. For those who were going to sell all of the stock in less than a year and a day, it definitely makes more sense to take the LTCG on the warrants.

I wonder if there are enough other people who are going to be thinking about the tax implications of ordinary income vs. capital gain income to drive the price of warrants down as the exercise date approaches?

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.