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Posted On: 08/04/2020 1:52:00 AM
Post# of 153903
The stock is sold for Tax purpose. Transaction Code is "F" which means for Tax
https://en.wikipedia.org/wiki/Form_4#:~:text=...20Form%205.
When exercising option, IRS will tax you regardless of you holding or selling the stock. The paper gain is the fair market value minus the option cost. Therefore, the higher the market value, the higher the tax. By exercising the option right now, NP is telling us he is expecting the stock to go up. So why pay more tax later when he can pay less now.
BTW some folks exercise and hold right before the dot com burst and end up owing IRS a huge tax because of the paper gain. I heard a guy killed himself because of that.
https://en.wikipedia.org/wiki/Form_4#:~:text=...20Form%205.
When exercising option, IRS will tax you regardless of you holding or selling the stock. The paper gain is the fair market value minus the option cost. Therefore, the higher the market value, the higher the tax. By exercising the option right now, NP is telling us he is expecting the stock to go up. So why pay more tax later when he can pay less now.
BTW some folks exercise and hold right before the dot com burst and end up owing IRS a huge tax because of the paper gain. I heard a guy killed himself because of that.
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