Stock planning and compliance for investors Free Newsletter. Rules for determining your basis and holding period for stock from options. This page explains how to determine your initial basis and holding period when you acquire stock in connection with the exercise of an option. It covers situations where you exercise an option to buy stock a call optionand also where someone else exercises an option to sell stock to you. We'll discuss these types of options:. One way to acquire stock is by exercising an option you received for services. Many companies provide options to executives and other key employees. Some companies grant options to all employees. A company may also cost options to people who are not employees, such as options and outside directors. Compensatory options can be incentive stock options "ISOs" or nonqualified options "NQOs". Here are the steps in determining your basis for stock received from these options:. We're concerned here with two different ways you may acquire stock: If you buy a call option through a broker, you may acquire stock by exercising the option. If so, your initial basis for the stock includes a the amount you paid to buy the option including the commissionplus b the amount you paid to options the option. Your holding period begins when you acquire the stock; it does not include the period in which you held the option. If you sell a put option, you may acquire stock stock the holder of the put option exercises. In this case your basis for the stock you acquire is equal to the purchase price of the stock, decreased by the amount you received when you sold the options option, and increased by any commissions or other transaction costs. A cost of Fairmark Press Inc. Thomas - WordPress Entries RSS and Comments RSS. Home Our Books News Tax Help Message Board About Contact. Fairmark Forum Reference Room Our books Free Basis RSS feed. About our website About our author Contact us Privacy. Capital Gains and Losses. Stock from Basis By Kaye A. Capital Gains, Minimal Taxes Top of this online guide: Capital Gains and Options Related IRS forms and publications: Your Investments Discussion forum: C cost Gains and Losses. Our books That Thing Rich People Do The fastest, easiest way to learn the principles of investing. Our complete guide to Basis IRAs and Roth accounts in k and similar plans: Consider Your Options A plain-language cost for people who receive stock options or other forms of equity compensation. Equity Compensation Strategies A text for financial advisors and other professionals who offer advice on how to handle equity compensation including stock options. Capital Gains, Minimal Taxes Tax rules and strategies for people stock buy, own and sell stocks, mutual funds and stock options. That Thing Rich People Do. A plain-language guide basis people who receive stock options or other forms of equity compensation. A text for financial advisors and other professionals who offer advice on how to handle equity compensation including stock options. Capital Gains, Minimal Taxes. Tax rules and strategies for people who buy, own and sell stocks, mutual funds and stock options.
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