Advanced Micro Devices - Moderated (AMD) Message Board

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Technology Stocks : Advanced Micro Devices - Moderated (AMD)

AMD 259.65

+2.3%

3:59 PM EST

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To: Petz who wrote (155557)	4/10/2005 11:24:24 PM
From: Biomaven	Read Replies (2) of 275872

>>I did not realize that early exercise, as Hector has done, results in immediate tax liability taxed at ordinary income rates. (PS, it is probably even worse than that, since this income is for-sure taxed at even-higher-than-ordinary "AMT" rates.)<< 1. The options are sufficiently deep in the money that their exercise doesn't give up much time value. But it does involve paying tax now instead of later. 2. In terms of tax, this seems to have been a NQ option. That means the spread gets taxed at ordinary income rates upon exercise. ISO grants don't get taxed at exercise, but because of AMT optionees are in practice forced to sell the shares and disqualify the ISO - that essentially turns them into a NQ (except withholding on the taxes is not required). 3. The dramatic difference between the ordinary income rates and the long term cap gains rates surely provides the motivation for this transaction. Thus I concur that this is bullish, with a > 1 year time horizon. Buy out of the money LEAPS. Peter

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