No. of Recommendations: 0
tonyw44 replies...
Yes, he should diversify, but there is a risk to that. If he cashes in his options and
he doesn't do it in a way that ensures that he pays a long term capital gains rate,
he could end up paying more money in taxes than he should.

Make sure he cashes in options that are older than one year first. Let's say he's
got options that were issued 18 months ago. Cash those in first -- he will get
both the long term capital gains rate and a higher basis. The goal is to get over
the threshold for long term capital gains and to maximize the basis...

Are you saying that one does not have to own the shares from the options in order to take advantage of the long tem capital gains rate if they're held over a year?

Consider the two scenarios:
- Joe Fool has options that vested, say as early as yesterday. He exercises his options by buying the shares, but does not cash in. Joe holds on to the shares for over a year, and then sells.
- Jane Fool has options that vested a year ago. She exercises these options by buying the options and selling them in the same transaction (cashing in). Jane has not owned the shares for more than a year.

I know that Joe will be taxed at the long term captial gains rate. But is Jane taxed at long term rates too? This is probably better suited for the Tax Board, but since you brought it up ...

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