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Posted by njoracle on December 20, 2006, 9:52 pm
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I have some worthless options (for most of 2006) that don't
expire until 1/17/2007. Broker is trying to sell them for a
penny but so far no takers. Is there any way that I can
write them off as a 2006 tax loss or will I have to until
2007?
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Posted by Stuart A. Bronstein on December 22, 2006, 1:14 am
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> I have some worthless options (for most of 2006) that don't
> expire until 1/17/2007. Broker is trying to sell them for a
> penny but so far no takers. Is there any way that I can
> write them off as a 2006 tax loss or will I have to until
> 2007?
Why doesn't your broker buy them?
Stu
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<< The foregoing was not intended or written to be used, >>
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Posted by njoracle on December 23, 2006, 1:27 am
Please log in for more thread options Stuart A. Bronstein wrote:
>> I have some worthless options (for most of 2006) that don't
>> expire until 1/17/2007. Broker is trying to sell them for a
>> penny but so far no takers. Is there any way that I can
>> write them off as a 2006 tax loss or will I have to until
>> 2007?
> Why doesn't your broker buy them?
They use to do it that way. But now they issue something
called a "Cabinet" order so it can actually be processed on
an exchange. A discussion of "Cabinet" orders appears at
http://www.sec.gov/rules/sro/cboe/2006/34-53808.pdf
I suppose they feel they have to follow the SEC rules on
this process. Perhaps on the last day of the year they will
buy them back if all else fails, or not.
Moderator:
I will buy them from you for a penny and you pay all
costs. But, check to make sure you will have an actual
out-of-pocket loss to write-off. If you did not pay for
the options or pay taxes on them when you received them,
you will have no loss to write off.
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<< The foregoing was not intended or written to be used, >>
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<< that may be imposed upon the taxpayer. >>
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<< to this newsgroup as well as our anti-spamming policy >>
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Posted by Ernie Klein on December 23, 2006, 1:27 am
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>> I have some worthless options (for most of 2006) that don't
>> expire until 1/17/2007. Broker is trying to sell them for a
>> penny but so far no takers. Is there any way that I can
>> write them off as a 2006 tax loss or will I have to until
>> 2007?
> Why doesn't your broker buy them?
There is an options market. One can buy and sell
unexercised options prior to the expire date. However, it
the underlying stock price drops way below the exercise
price (or itself becomes worthless), then the value of the
options can drop to zero because no body wants an option to
buy stock at a higher price that is is sell for on the
market.
I think this is what the OP was talking about.
If one holds options that have not been exercised and the
options themselves become worthless (or next to worthless) I
don't think there is any tax "write-off" (read deduction),
because the options only had a paper value at one time, but
the OP has lost nothing because he had never had anything
except a piece of paper -- in other words he isn't out any
money at all.
One cannot deduct "what might have been" if the options had
been sold when they _did_ have worth.
I had the same problem myself a few years ago. The company
I worked for gave me some options to buy the Company stock
at $35 when the stock was selling for $45. I could have
sold them (the options) 6 months later for about $5,000, but
I didn't -- hoping they would become worth more. Along came
the downturn of the market and the stock price fell to about
$25 and the value of the options to purchase stock at $35
became worthless. The stock never recovered it's price
before the options expired, so I received _nothing_, nor
could I take a loss on taxes because I never _received_ a
gain.
Am I wrong, or did everyone else that answered misread that
it is options and not stock that the OP was asking about?
--
-Ernie-
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<< The foregoing was not intended or written to be used, >>
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<< that may be imposed upon the taxpayer. >>
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Posted by Seth Breidbart on December 25, 2006, 10:13 am
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> If one holds options that have not been exercised and the
> options themselves become worthless (or next to worthless) I
> don't think there is any tax "write-off" (read deduction),
> because the options only had a paper value at one time, but
> the OP has lost nothing because he had never had anything
> except a piece of paper -- in other words he isn't out any
> money at all.
He had the money he paid for the options. Then he paid it
for the options; at their expiration date (unexercised),
they disappear, which is considered a sale for $0.
> One cannot deduct "what might have been" if the options had
> been sold when they _did_ have worth.
Sure: He pays $100 for an option. The stock goes up, the
option goes to $200. Then the stock goes down, and the
option expires worthless. He gets a deduction for $100, the
$200 is only the value used for kicking himself.
> I had the same problem myself a few years ago. The company
> I worked for gave me some options to buy the Company stock
> ^^^^
If you didn't pay tax on the value of the options, your cost
was $0, so that's your deduction.
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 (2006) - All rights reserved. >>
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