Some thoughts regarding exercising warrants for th
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Posted On: 06/27/2020 9:45:53 AM
Some thoughts regarding exercising warrants for those that have them. There are some actions one can take to limit your tax bill.
1) You are taxed in the year of exercise at: SP at exercise - (cost of warrant + exercise price). So, exercising at a lower SP => lower tax the year of exercise.
2) If you hold the exercised warrant shares for over 12 mths, then you pay long-term capital gains vs. short term.
3) If you exercise the warrants with IRA money, then you are tax deferred (TRAD) or tax free (ROTH).
Given that I am a long-term bull (~10 yrs in CYDY), I have been exercising all of my warrants to optimize my tax bill.
Example: Let's say there is a BO. If you previously exercised your warrants in a ROTH IRA, you have zero tax bill. Vs. paying ordinary income tax on the BO price minus the exercise price. For those with a lot of warrants, that could be hundreds of thousands of dollars in tax liability.
1) You are taxed in the year of exercise at: SP at exercise - (cost of warrant + exercise price). So, exercising at a lower SP => lower tax the year of exercise.
2) If you hold the exercised warrant shares for over 12 mths, then you pay long-term capital gains vs. short term.
3) If you exercise the warrants with IRA money, then you are tax deferred (TRAD) or tax free (ROTH).
Given that I am a long-term bull (~10 yrs in CYDY), I have been exercising all of my warrants to optimize my tax bill.
Example: Let's say there is a BO. If you previously exercised your warrants in a ROTH IRA, you have zero tax bill. Vs. paying ordinary income tax on the BO price minus the exercise price. For those with a lot of warrants, that could be hundreds of thousands of dollars in tax liability.
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