|
Posted by Thanks on February 10, 2008, 2:41 pm
Please log in for more thread options
Hello
In the early 90's I purchased a stock option for $0.50 with a strike
price of 5.
Near expiration I exercised the option and brought the stock at 5.
Is my basis for that stock 5 or is it 5.5 (including the cost of the
option)
Thanks very much.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
|
|
Posted by Seth on February 10, 2008, 5:25 pm
Please log in for more thread options
>In the early 90's I purchased a stock option for $0.50 with a strike
>price of 5.
>
>Near expiration I exercised the option and brought the stock at 5.
>
>Is my basis for that stock 5 or is it 5.5 (including the cost of the
>option)
$5.5 plus commissions (on the option purchase, and the exercise fee).
Seth
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
|
|
Posted by dapperdobbs on February 10, 2008, 11:51 pm
Please log in for more thread options On Feb 10, 5:25 pm, se...@panix.com (Seth) wrote:
[snip]
> >Is my basis for that stock 5 or is it 5.5 (including the cost of the
> >option)
>
> $5.5 plus commissions (on the option purchase, and the exercise fee).
>
> Seth
Confirm, the IRS Publication covering that is Investment Income and
Expenses - Publication 550, heading 4 Sales and Trades of Investment
Property, topic Capital Gains and Losses, sub-topic Options.
a) The call premium paid is added to the cost basis on exercise.
b) If a (covered) call is sold and exercised, the call premium
received is added to the sale price of the stock.
c) If a cash covered put is sold and assigned, the premium received is
subtracted from the cost of the stock, and,
d) if a put is bought and exercised the premium is subtracted from the
sale price of the stock.
Generally, the holding period for the underlying stock determines the
treatment of the option premium. E.g. if a covered call is exercised
after the stock has been held one year and one day, the premium is
long term. E.g. if stock is assigned pursuant to a put you sold, the
holding period begins with the puchase of the stock. E.g. If you buy a
call which you subsequently exercise to purchase the stock, your
holding period for the stock begins with the exercise date. (The
purchase of a put is treated as a short sale, and I'm not sure I
understood the tax treatment for the holding period, but apparently
the holding period begins with the purchase of the put - sorry I just
don't quite get it, but it would seem to differ from the treatment of
a call purchased.)
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
|
| Similar Threads | Posted | | difference between adding short dividends to cost basis or investment interest | January 22, 2008, 5:41 pm |
| Stock Cost Basis | April 23, 2006, 1:43 am |
| Stock Cost Basis | April 24, 2006, 11:14 am |
| ESOP(?) Stock & Cost Basis | March 30, 2008, 3:18 pm |
| unknown cost basis of stock | May 22, 2008, 12:06 pm |
| Stock cost basis and gift tax exclusion ($12k a year) question | January 19, 2007, 1:39 am |
| Calculating cost basis on ESPP shares in a foreign stock | January 23, 2007, 2:04 am |
| Stock Option Freeze | November 26, 2006, 11:13 am |
| Exercising a stock option | January 9, 2008, 9:02 am |
| Help with non-qual stock option...I think I am screwed | March 7, 2007, 4:49 am |
|
|
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap