Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: L. Adam Latham who wrote (87019)	8/20/1999 7:09:00 PM
From: Gerald Walls	Read Replies (1) \| Respond to of 186894

<1> For calculation of long-term vs. short-term for holding the shares that I exercised, what do I use as a date - when I purchased the options (July 1998) or when I exercised them (January 1999)? My guess is Jan '99. The date of exercise, I believe. At least that's what I did a few years back the one time that I actually exercised options instead of selling them. <2> I had a short-term gain on the half of the options I sold, but how do I account for the half I exercised? I basically "lost" the premium I paid when I exercised them, so can I consider this a short-term loss to offset the gain from the half I sold? You add the price you paid for the option to the price you paid for the stock to obtain your basis. Example: If you paid $5 for XYZ 60 calls and exercised them then your basis in the XYZ stock is $65/share, regardless of the fair market value of the shares when you exercise. You claim no loss or gain on the options themselves when you exercise.

To: L. Adam Latham who wrote (87019)	8/20/1999 7:41:00 PM
From: Gerald Walls	Read Replies (1) \| Respond to of 186894

The edit window closed while I was updating this message, so here's the new version: <1> For calculation of long-term vs. short-term for holding the shares that I exercised, what do I use as a date - when I purchased the options (July 1998) or when I exercised them (January 1999)? My guess is Jan '99. <2> I had a short-term gain on the half of the options I sold, but how do I account for the half I exercised? I basically "lost" the premium I paid when I exercised them, so can I consider this a short-term loss to offset the gain from the half I sold? According to the IRS (http://ftp.fedworld.gov/pub/irs-pdf/p550.pdf, page 51, Table 4-1 on page 52): "If you exercise a call, add its cost to the basis of the stock you bought. If you exercise a put, reduce your amount realized on the sale of the underlying stock by the cost of the put when figuring your gain or loss. Any gain or loss on the sale of the underlying stock is long term or short term depending on your holding period for the underlying stock." You add the price you paid for the option to the price you paid for the stock to obtain your basis. Example: If you paid $5 for XYZ 60 calls and exercised them then your basis in the XYZ stock is $65/share, regardless of the fair market value of the shares when you exercise. You claim no loss or gain on the options themselves when you exercise. When you sell the stock, you claim a short- or long-term gain based on the date you bought the stock. What a lot of people don't realize is that if a stock is not long term when they buy a protective put then the long-term/short-term clock is stopped until the the put is sold, exercised or expired.