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Pastimes : Let's Talk About Our Feelings!!!
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To: Neocon who wrote (71449)1/7/2000 5:46:00 PM
From: Bill  Read Replies (1) of 108807
 
Right now you pay taxes on the difference between the exercise price and the price at which you bought the option. This is considered ordinary income if the option is non-qualified. You then have the choice of whether to sell the stock or hold it. The next taxable event on the security would include the difference between the value when last taxed and the value when you sell it.

In your example, you'd be taxed on the $400 (minus what you paid for the option) as one event, and the drop in value to $75 from $400 (loss of $325) as another event.

(Disclaimer: I am not an accountant, please seek professional tax advice if you have stock options.)
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