"Geoff" <G...[at]yahoo.com> wrote:
- quote -

I may have screwed up but I'm not sure I agree that it was
difficult to explain why I excercised them. I ultimately
sold the shares I purchased as part of a buyout from a
private equity firm that bought the majority of the company
and thus the majority of my shares. Everyone with shares
understood that this was the planned exit and thus everyone
was looking to excercise their options at least a year
before any transaction went down. Unfortunately, we had no
idea when it actually would and I guessed wrong and
purchased only 8 months before the transaction.

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"Tom Forrester" <tom.forrester[at]gmail.com> wrote:
- quote -

There is an article in Business Week today about that.
You pay regular income tax on your profit between what you
paid for the option and the exercise price, owed in the year
you do it. You then pay capital gains tax on the profit
between the exercise price and what you sell it for.

So yes, it appears you screwed it up. Yes, valuation is
tricky. If you claim the basis is the option value, you
would be hard pressed to explain why you exercised them;
should have done that when you could have waited to see
where the stock went.

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Tom Forrester wrote:
- quote -

Are these options NQSO's or ISO's? Or something else?

That affects the tax treatement.

-Jim

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"Geoff" <Geoff[at]yahoo.com> wrote:
- quote -

Depends - were they qualified or non-qualified options?

- quote -

Excellent advice.

Stu

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Geoff <Geoff[at]yahoo.com> wrote:

- quote -

If it's a market option that you bought for $5, you have a
$15 basis in the stock, and $35 of unrealized capital gain
(not taxed until realized). If it's an employment-related
option, it works differently.

Seth

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"Tom Forrester" <tom.forrester[at]gmail.com> wrote:
- quote -

That is an interesting point. If you paid $10 to exercise
an option to buy a stock worth $50, did you make $40? Or is
the profit put off until you sell it? I don't know; but I
darn well would find out. (though I suspect you did it
properly).

With money like that involved you don't want to be doing it
wrong, nor do you want to rely on information you pick off
the internet. It is a great tool and I have gotten helpful
advice many many times; but the IRS won't be impressed by it
if it happens to be wrong. Consult a good local accountant.

I have also gotten wrong information from usergroups;
ocassionally from everyone answering my question. Perhaps I
phrased it poorly or left out important information.
Fortunately I did not rely on it.

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om.forrester[at]gmail.com wrote:

- quote -

You got that kind of money and you're doing your own taxes?
<grin
-HW "Skip" Weldon
Columbia, SC

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"Bill Brown" <brow...[at]longwood.edu> wrote:
- quote -

Yeah, I had a 1.7 mil short-term capital gain. When I
excercised the options at the end of 2005, I didn't pay any
tax -- I might have screwed this up, however. The company
is a small S-Corp so valuation of the shares is tricky. I
assumed that the value was the option value because there
was no other outside valuation. Was this a mistake?

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tom.forres...[at]gmail.com wrote:

....
- quote -

So you had a STCG of $1.7 million more or less?

No, there isn't much you can do, except make sure you used
the right number for your basis in the stock as mentioned
by LoTax.

A huge gain is better than a huge loss. Keep up the excellent
choice of employers and you can retire before ... uh, well,
you can almost retire now.

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tom.forres...[at]gmail.com wrote:

- quote -

How much income did you recognize on the exercise of the
options in '05? This adds to your tax basis in the stock
and reduces your gain on its sale in '06. Or are you
already on top of that?

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I am a 35 year old single guy. Last year (6/15/2006), I
sold 60% of my stock in a S Corp that I work for. I was
granted the options in 2000, but I didn't excercise the
options until 12/1/2005. I am now looking down the barrel
of a 600,000 tax bill because of the short- term capital
gain.

Before I click 'submit', is there anything I can do to
minimize the tax payment or spread it out over time?

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