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To: Steve Martin who wrote (24118)4/19/1999 4:56:00 AM
From: Dragonfly  Respond to of 213177
 

The other part of this is that if you exercise a large number of options, you have to pay for them. Well, the wisest way to pay for them is to sell some of your stock... this is called exercise-and-sell (duh).

In other words, by exercising-and-selling $5 million in stock, you get the $2million proffit that you can use to exercise and KEEP other shares. That way all those shares get the superior capital gains treatment if you hold them for 18 months.

Ideally you do this in a way where you can sell a small part of your position and cover the exercise cost of the rest of your position.

Dragonfly



To: Steve Martin who wrote (24118)4/19/1999 1:53:00 PM
From: Adam Nash  Respond to of 213177
 

When you exercise stock options, you are liable for Alternative Minimum Tax on the difference
between the current value and the strike price at the time you exercise even if you don't sell.


This applies to only ISO options, not NSO options. With NSO you own income tax on the difference, not AMT.

I am pretty sure that Microsoft originally worked on the US Tax Code before DOS/Windows ;-)


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