Arthur Kamlet <ArtKamlet[at]aol.REMOVE.com> wrote:

- quote -

Is it true that the treatment is the same with respect
to FICA and Medicare?

Steve

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Larry Israel <VSLARRY[at]weizmann.weizmann.ac.il> wrote:

- quote -

Pretty correct. Assuming the stock is publically traded,
the amount of ordinary income is determined by the closing
price of the stock on the day it was sold, and sets the
basis for the sale. Since the sale itself occured
intra-day, it generally was at a slightly different price
than the closing price, thus creating a small gain or loss.

Steve

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Larry Israel wrote:

- quote -

Not quite. The capital gain is a short-term capital gain and
is taxed at the same rate as ordinary income. The difference
between exercise price and stock value on day of exercise is
treated as wage income and is reported to you on your W-2.
The difference between the cost of the stock and value of
the stock when sold is capital gain and is reported on Sch.
D. If the stock is sold on the same day the options were
exercised, there should be little or no capital gain and
there may be a small loss if there were fees charged to sell
the stock.

Dennis

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VSLARRY[at]weizmann.weizmann.ac.il (Larry Israel) wrote:

- quote -

You should also have a small short term capital loss,
reported on Schedule D, if you paid a commission to buy and
then sell the stock. This is the difference between the
value of the stock and the amount you received before taxes.

--
Vic Roberts
Replace xxx with vdr in e-mail address.

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Larry Israel <VSLARRY[at]weizmann.weizmann.ac.il> wrote:

- quote -

On same day exercise and sale, the tax bill is the same for
statutory (ISOs) and NQSOs.

You might want to find out if these were ISOs or NQSOs, but
the tax treatment on same day ex/sale is the same.

The difference between fair market value upon exercise and
exercise price is called the bargain element and is taxed as
ordinary income, and added to the W-2 form. So if it's on
the W-2 form, there's no need to do anythiong special except
transfer the W-2 figures to Form 1040.

The broker should issue a 1099-B showing sale of the stock
that was acquired through option exercise. On Sch D, show a
short term sale equal to the 1099-B amount and the cost
basis should exceed that amount by the amount of broker's
fee/commission, resulting in a small Sch D loss.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Someone holds stock options given by an employer, based on
the profit the employer made. The options were
non-transferrable, so I assume that they were statutory
options. The options are then held for over two years, and
the stock bought, and then sold immediately. As I read the
example on page 11 of Publication 205 (for 2005), bottom of
the middle column, the amount that the value of the stock
exceeded the option price on the day the option was
exercised is ordinary income. Any increase after that is a
capital gain. But since the stock was sold immediately, it
was not held for a year, and so the entire gain is ordinary
income.

Is my understanding correct?

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