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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Jay Couch who wrote (24352)	4/12/1999 9:14:00 PM
From: The Phoenix	Respond to of 77400

To: Jay Couch who wrote (24352)	4/12/1999 9:14:00 PM
From: The Phoenix	Read Replies (3) \| Respond to of 77400

Actually it makes more sense to take out a loan to pay to exercise - hold for a year and get 20% tax rate as opposed to exercising and selling and paying income tax rates of 36%. AMT becomes a non-issue if you exercise and sell.... AMT is an adjunct tax calculation that only applies if you exercise and hold...it is meaningless otherwise since AMT is intended to capture taxes on expected future profits. It's governments way of getting taxes now on unrealized gains. When you actually sell the underlying security you get a tax credit for the amount of the AMT and are then taxed for capital gains on the difference between the option price and the selling price. OG

To: Jay Couch who wrote (24352)	4/13/1999 11:32:00 AM
From: TigerPaw	Read Replies (1) \| Respond to of 77400

and hold on to them for a year (to only have to pay long term capital gains I had to mess with options this year. The way it worked for me was that at the time of excersize, regarless of whether you immediately sold or bought the shares, you owe regular income tax on the difference between the option strike price and the current market value. AMT is not directly involved, although anytime you have a high income the AMT may disallow various deductions. (regarless of the reason for the high income) If you take possession of the shares, you pay the tax (right then with some other cash on hand), but your basis in the shares becomes the current market price. If the stock goes up and you hold a year it is capital gains (or loss if it goes down). It's really just the same as if you excersize for cash and then buy the stock, except you don't pay additional commissions. The decision comes down to Do you want shares of this stock at the current price? TP