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Posted by DORFMONT@aol.com (Linda Dorfmo on February 14, 2007, 10:21 pm
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>> I've exercised and sold my company options last year.
>> The proceeds were ~10,000 and after all taxes were
>> withdrawn. =A0This was reported on my W-2 form in box 12c with
>> letter "V".
>>
>> On another hand, I have investment capital losses that
>> should off-set my gains from the options sell.
>>
>> My assumption was that I could write-off my losses against
>> my options gains. =A0Is it correct assumption?
> No. =A0The gain from the options was wage income, which is why
> it wound up on your W-2. =A0When you report it on Schedule D
> you include the amount treated as wages in your basis. =A0A
> same-day exercise/sale usually results in a short-term
> capital loss equal to the fees. =A0A great source for
> information on options iswww.fairmark.com.
>
> I don't know if you would have made the same decision had
> you understood the rules, but for lurkers, the time to
> validate assumptions is before you act, not after.
>> I used TurboTax, but not sure if this was taken into
>> account. How do I make sure of that?
> Check to see if Schedule D looks like I said it would. =A0If
> it doesn't, something's wrong.
Phil is right. I just did one of these for a client and
examined the company paperwork in detail. The sales price
was $40,000, the exercise price was $23,859 and the
difference (the bargain element) was $16,141. The $16,141
was in his W-2. Since the money was already taxed as wages,
the full amount he paid for the stock was $40,000 with a
selling expense of $58.
$40,000 - $40,000 =3D 0 gain or loss, and the selling
expense is a loss.
If you do this again, keep in mind that you will most likely
not have any gain or loss except for the selling expense if
you exercise and sell the same day. If you buy the stock
with your own money and hold it for sale later, there can be
a change in value. Most employees need to use the proceeds
of the sale to pay for the purchase.
Linda Dorfmont E.A., CFP, CSA
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