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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: AurumRabosa who wrote (68066)	9/22/1999 2:53:00 PM
From: Exacctnt	Read Replies (1) \| Respond to of 132070

Ron, I am not aware of a 2 year holding period on stock after exercising a stock option before it can be considered a capital gain. Regards

To: AurumRabosa who wrote (68066)	9/23/1999 2:02:00 PM
From: Kaye Thomas	Read Replies (1) \| Respond to of 132070

The required holding period for stock acquired through exercise of options depends on the type of option. * For nonqualified options, you report ordinary compensation income equal to the bargain element (or spread) at the time you exercise the option. There's no special holding period thereafter, except of course you have to hold more than a year to get long-term gain on any subsequent appreciation. * For incentive stock options you don't report income at the time of exercise, although you may run into alternative minimum tax (AMT) at that time. The bargain element at the time of exercise turns into ordinary income if you sell or otherwise dispose of the stock before the later of (a) one year after you exercised the option, or (b) two years after the company granted the option (a disqualifying disposition). So if you held the option for at least a year before you exercised it, you only have to hold the stock one year to avoid a disqualifying disposition. Many ISO plans prohibit exercise of the option in the first year after it's granted, and that does away with any concern about holding for two years. * For stock purchased under an employee stock purchase plan (like the Intel plan someone mentioned), you have a rule similar to the ISO rule described in the preceding paragraph. The difference is that these plans usually don't issue options in the normal sense of the word, so the two-year period is more likely to be relevant here. More details are available on my web site, although I haven't gotten around to posting the ESPP rules there yet. Look for the section called Compensation in Stock and Options. Kaye Thomas, author Fairmark Press Tax Guide for Investors fairmark.com