|
Posted by Roy Starrin on January 9, 2008, 9:02 am
Please log in for more thread options
Am trying to get some tax advice for my son (who asked for it) re: his
exercise of a stock option.
Several years ago as an incentive to join his present company, he was
given the option to puchase several hundred shares of common stock at
what was then about $29/share. He now wishes to exercise the option
and immediately sell the stock. Stock is now about $60/share.
Since he never paid for the stock in the first place, does he pay tax
on the entire $60, or on the $31 difference.
I know the capital gains rates changed this year. At what rate will
this gain be taxed?
Anything else of significance?
TIA
--
<< ------------------------------------------------------- >>
<< 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 John L on January 9, 2008, 3:08 pm
Please log in for more thread options
>what was then about $29/share. He now wishes to exercise the option
>and immediately sell the stock. Stock is now about $60/share.
>Since he never paid for the stock in the first place, does he pay tax
>on the entire $60, or on the $31 difference.
He pays tax on the $31 difference.
>I know the capital gains rates changed this year. At what rate will
>this gain be taxed?
Since he's not holding the stock for a year to be taxed as a long term
gain, it's ordinary income.
--
<< ------------------------------------------------------- >>
<< 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 Roy Starrin on January 9, 2008, 4:28 pm
Please log in for more thread options On Wed, 9 Jan 2008 15:08:48 EST, johnl@iecc.com (John L) wrote:
>>I know the capital gains rates changed this year. At what rate will
>>this gain be taxed?
>
>Since he's not holding the stock for a year to be taxed as a long term
>gain, it's ordinary income.
Thanks for your help.
So you are saying that he should have bought the stock, then waited a
year before selling it, for it to have been a capital gain event?
--
<< ------------------------------------------------------- >>
<< 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 Stuart Bronstein on January 9, 2008, 4:49 pm
Please log in for more thread options Roy Starrin wrote:
> johnl@iecc.com (John L) wrote:
>
>>>I know the capital gains rates changed this year. At what rate
>>>will this gain be taxed?
>>
>>Since he's not holding the stock for a year to be taxed as a long
>>term gain, it's ordinary income.
>
> So you are saying that he should have bought the stock, then
> waited a year before selling it, for it to have been a capital
> gain event?
Perhaps. Nonqualified incentive stock options are taxed as ordinary
income (the difference between the exercise price and the current
value) when they are exercised. So assuming his options are
nonqualifed, your son would have the same amount of taxable income
whether he sells the stocks or not.
If he exercises the option but does not sell them, and pays the tax,
any additional increase in value would be capital gain if he holds them
for the required period.
So the only way he could have done better would have been to have
exercised the options when the stock had a lower value.
If the options were qualified, there is no tax on exercise. To get
long term capital gain treatment he would still have to hold the actual
stock, rather than the options, for a year.
Stu
--
<< ------------------------------------------------------- >>
<< 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 dpb on January 9, 2008, 4:57 pm
Please log in for more thread options Roy Starrin wrote:
> On Wed, 9 Jan 2008 15:08:48 EST, johnl@iecc.com (John L) wrote:
>
>
>>> I know the capital gains rates changed this year. At what rate will
>>> this gain be taxed?
>> Since he's not holding the stock for a year to be taxed as a long term
>> gain, it's ordinary income.
> Thanks for your help.
> So you are saying that he should have bought the stock, then waited a
> year before selling it, for it to have been a capital gain event?
To be long-term capital gain, yes. It's still a capital gain, just
short term if not held for the requisite time (which is >1 year, not
just one year, incidentally--one day over is enough, but has to be
over). The transaction(s) will still be reported on Sch D, but in the
short term section, not the long term.
--
--
<< ------------------------------------------------------- >>
<< 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 | | Stock Option Freeze | November 26, 2006, 11:13 am |
| Help with non-qual stock option...I think I am screwed | March 7, 2007, 4:49 am |
| Adding Option cost to stock basis | February 10, 2008, 2:41 pm |
| Best Tax Software to handle various stock & option transactions? | June 21, 2008, 10:46 pm |
| ESPP discount w/o fixed option price | February 4, 2008, 11:14 pm |
| Any Option to Apply Partial or No NOL Carryforward to Current Tax Year? | September 2, 2008, 9:43 am |
| Stock Options | February 18, 2007, 9:51 pm |
| Phantom Stock | May 10, 2007, 11:54 pm |
| stock options | April 15, 2006, 2:59 am |
| Stock Dividend | May 29, 2008, 9:30 pm |
|
|
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap