Tax Laws on Executing a Private Stock Option?
544858
There are four types of options that you could get:\n\n1.  Qualified stock options\n2.  Nonqualified stock options\n3.  Warrants\n4.  OTC or Exchange traded options.\n\nThe first two are granted to employees or those related to the firm in some way (e.g., board members).  The third are long term options sold by the company.  They could then be sold in the secondary market.  It sounds like this is what you have.  The fourth is a contract between two parties that does not involve the company.\n\nQualified stock options are part of a plan.  For most people, no taxes are due when the option is exercised.  When the stock is sold, the value above the strike price is considered capital gains and is taxed as such.  If you are subject to the Alternative Minimum Tax (AMT), then when you exercise, you have to pay AMT tax (20%) on the difference between the strike price and the fair market value.  If the stock is traded publicly, then the fair market value is the price.  If it is right before IPO, then the IRS will make you use the IPO price as the fair market value.  If it is more than six months to IPO, then the company can pretty much set its own value for the fair market value -- though if private equity was recently sold, that sets the market price.  When the stock is sold, the fair market value, rather than the strike price, becomes the basis for valuing the capital gains.\n\nFor nonqualified stock options, ordinary income tax is due on the difference between the strike price and the fair market value when the options are exercised.  For companies going IPO there is a real savings to exercising before IPO if the issue is going to be underpriced.  Dot-Commers saved millions in taxes doing this before the bust -- but there is a risk -- those who did it right before the bust owed millions in taxes, but had worthless stock.\n\nFor warrants or traded options, no taxes are due until the stock is sold -- at which time the value above the strike price is a capital gain.  However, if you sell the option before exercising, there may be taxes due on the gain of the option.
444746
I believe the government is allowed to access information from the landlord, and the person's bank account in this instance. There are no legal ways to evade tax. If you invest the money, you may be able to minimise your tax, but as I am from Australia and our tax laws are different to yours, I can't say for certain. \n\nThe American tax laws take up 1.2 million pages, so I'm sure they have covered everything.
209360
In general terms, yes you can (assuming the company is not set up as an S corp.); IF (like Trade mentioned) you can find a broker willing to administer the account for you. There are two caveats to think about, however.\n\nWhen you go off the beaten path investment-wise, be prepared for extra expenses, extra paperwork and dealing with potentially reduced liquidity.\n\nYou CANNOT own private equity within an IRA if you are also owner of the company issuing the stock. Self Dealing is a prohibited activity and it includes putting any asset into the plan that you benefit from, such as living in a house purchased by the IRA as an investment, or selling personal property to the IRA as well as selling your own company stock to the IRA.
714168
There is no “regular” tax implication when exercising stock options.  The regular tax kicks in when you sell the stock.\n\nIf the stock is sold more than 1 year after it was exercised AND more than 2 years after it was granted, then the gain from the grant date to the sell date is all capital gains.\n\nIf the stock is sold 1 year or less after it was exercised OR 2 years or less after it was granted, then the gain from the grant price to the Fair Market Value (FMV) when it was exercised is considered ordinary income not subject to FICA.  The remaining gain/loss is capital gain.  It is long term if the stock was held more than one year after it was exercised.\n\nAMT:\n\nAlternative Minimum Tax is different in that the exercise event DOES trigger tax.  The built-in gain from the grant date to the FMV at the exercise date is added to your AMT income.  When the stock is eventually sold, you will do two Schedule Ds...one for Regular Tax with the basis equal to the grant date price, and one for AMT with the basis equal to the FMV price.  Your regular gain will be larger than your AMT gain because your AMT basis will be larger.....you've already paid tax on some of your AMT gain whereas you didn't pay any regular tax on this gain.  Confusing, isn't it.\n\nWill you definitely have AMT when you exercise ISO stock?  Not necessarily.  Your AMT will be affected, but will it grow to the point where it will be higher than your regular tax?  It depends on other items on your return.  To get an idea of how much you can absorb, go back to your 2005 tax return and figure out your AMT and see how far it was below your regular tax.  This is an estimate of 2006, not a guarantee.\n\nIf ISO exercise does cause your AMT to be larger than your regular tax, of course, you will have to add the difference to your regular tax as you expect.  However, unlike other things that trigger AMT, ISO exercising is refundable.  What?  You get a credit for whatever additional tax you have to pay due to ISO exercising.  This credit carries forward to next year and, if not used up, carries forward to the next year.  It keeps doing this until it is used up.  This credit goes against regular tax until it drops to your AMT tax.\n\nComprehensive example:\n\n2006: Your normal regular tax is $20,000.  Your AMT is $16,000.  You exercise 10,000 shares with a FMV of $10/share with a grant price of $4/share.  You have to add 10,000 x (10 - 4) = 60,000 to your AMT income causing, let's say, $15,600 of additional AMT tax.  AMT is now $31,600 which is $11,600 more than your regular tax.  So, for 2006, your tax liability is $31,600, however, you get a credit of $11,600.\n\nIf in 2007, your regular tax is still $20,000 and your AMT is still $16,000, your tax is $16,000.  $4,000 of credit was used to lower your regular tax down to your AMT.  Your credit now drops to $7,600.\n\nIf in 2008 you sell the stock for $20, your regular gain is 10,000 x ($20 - $4) = $160,000.  Your AMT is 10,000 x ($20 - $10) = $100,000.  Again, you figure out your regular tax and AMT and if the AMT is lower than your regular tax, you get to use the carry-over credit until it is used up.\n\nOf course, part of your basis is your brokerage fees, but to keep things simple, I ignored these.  If you sell at a regular loss or even at an AMT loss, the rules still apply, but you can only get $3,000 per year of loss to use against other income.\n\nHope this helps  :)
460933
They don't really buy the stock.  Normally, they can get stock options granted to them as part of their compensation package.  Usually, though, the exercise price of the options is above 0.  This doesn't really matter.  They're still getting "free" money in that they don't have to buy the stock on the open market.
623103
They will no longer have to file with the SEC. They won't have quarterly earnings reports with analysts. Let's see, I think the 10K is exclusive to puclic companies, so they will no longer file this. The board of director's salaries and the executive salaries will not be made public. Dividend pay outs will not be made public. Their will no longer be yardsticks such as EPS,P/E multiples, or market capitializations; just good ol' fashioned appraisals. If you don't sell it back, you are losing out on income. You don't have much of a choice. If the decision to be sold, from the other shareholders has been made, then you have to go along with it. If you don't, it's just folly.
374
As you may know, NQSO (non qualifying stock options) have tax withheld at source as soon as you exercise, so theoretically you don't have to pay any estimated tax on NQSO exercises/sales (although see * below).\n\nWith Incentive Stock Options (ISO) though, the situation is quite different.\n\nIt sounds like you plan to exercise and sell your ISOs on the same day.  If so, then this is what's called a "disqualifying disposition".  In other words, you will be liable for ordinary income tax on the spread (sale price - exercise price).  \n\nIn general, the IRS wants you to pay tax in the quarter in which the related income is earned.  So you theoretically should pay the estimated tax at your standard income tax rate in the same quarter you exercise and sell ISOs.  You do this by filing an Estimated Tax payment.\n\n\nHowever, there is a way to postpone filing these taxes until your normal April next year tax return.     The following information is sourced from See http://www.fool.com/school/taxes/taxes35.htm. \n\n1.  The simplest way is just to suck it up and not worry about paying a penalty for underpayment of taxes.  Depending on how much you think you can earn on your money, and when you were supposed to pay the tax, this may be a win for you (this used to happen a lot during the dotcom/IPO days of 1999-2000).  Be wary though that you probably can't keep doing this year after year without the IRS getting on your case. \n\n2.  Alternatively, you can avoid the underpayment penalty *if* any of the following are true\n\na) you owed no tax at all in the prior tax year (and were a US citizen/resident for all of that year)\n\nb) you expect to owe less than $1000 in tax this year (unlikely, since you're exercising ISOs)\n\nc) your ordinary income tax withholding (e.g. from your wages and/or NQSO exercise) will exceed 90% of this year's tax bill.  This may happen if your ISO exercise/sale is less than around 10% of your total income for the year.\n\nd) your ordinary income tax withholding (from wages and/or NQSO) is greater than 100% of your last year's tax liability and your previous year's Adjusted Gross Income was < $150,000.   If your previous year's AGI was >= $150,000 (lucky you), then you need to pay at least 110% of last year's tax liability in order to avoid a tax underpayment penalty.\n\n\n\nClear?  As mud?\nOption d) is usually the easiest one to satisfy if you're making a large ISO exercise in this year only, particularly if you got a raise this year and are hence paying more taxes than last year anyway.\n\nHowever, you may also want to consider whether you should do an exercise and hold (for 1 year) to pay long term capital gains tax (15%) instead of your ordinary W2 income tax rate (probably 25-35%).  \n\nIf you do, you will *still* be subject to tax this year, due to the dreaded AMT (Alternative Minimum Tax), but you can use that AMT tax liability as a credit for future years when your AMT is less than your ordinary income tax.  However, that's a topic for a whole 'nother question/answer.   \n\n\n* Even with NQSOs, if the amount held at source is less than your eventual tax rate for the year,  you may be subject to tax penalties unless you meet one of the exceptions listed in a) through d) above.
69610
Yes they can.\n\nWhat I've done is actually open a custodial account (you can do this at www.etrade.com for example). This way you can manage the investment account for them, but it is in their name and more importantly proceeds are taxed at their tax level, which so far for me has been zero.\n\nYes my 2 year old did a tax return !!!!
1109595
An accountant wouldn't lie to a lawyer would they?\n\nIt's called self-proprietorship. Look it up and do a search for SEP IRA. Some sources below.
985152
Are you still working for the company who granted you the options?  Have they done this before?  If yes, then ask several co-workers who they use.  \n\nUsing a chain preparer is hit and miss when it comes to stock options so ask questions if someone recommends them.
845258
The gains realized by a non-resident alien or foreign corporation from the sale of stocks and other securities is not subject to US tax.  The dividends are subject to 30% withholding unless the foreign person is a resident of a country that has a treaty with the US lowering the withholding rate.  See Section 871(a)(2) of the Internal Revenue Code.
130154
Employee stock option plan (ESOP)\n\nWill very by company
633015
First, be aware the tha IRS might not accept that the stock was really a gift if you have an employment relationship with the donor's family.\n\nAssuming that they treat the original transaction as a gift, you inherit the donor's basis. If you sell 25% of the stock now for $9,500, you would have a capital gain of $3,000 ($9,500 - 25% of $26,000). This would be a long-term gain eligible for a reduced tax rate (5% or 15%). The tax you would owe would depend on the complete details of your tax situation.\nThe amount you are receiving is not a dividend and in most circumstances there would be no reporting requirement imposed on your employer.
915804
Yes.  Most options can be exercised before expiration.  However, in many cases, it might be more advantageous to sell your option instead of exercising it, because they'll usually have a "time" premium still baked into the price of the option that you lose when you exercise the option.\n\nFor example, the AAPL Dec $80 call is currently 4.70.  The stock is $82.45 as of close on Wed.\n\nYou can exercise the option and buy the stock for $80, thus netting $2.45 ($82.45-$80), or you can sell the option and receive $4.70.  It's your choice!\n\nHope that helps!
752128
Selling short stocks or options is perfectly legal.  Because you are taking on a financial risk, which you may not be able to cover, your broker will have limitations of what it will allow you to do, based on your account balances and investing experience.\n\nA common practice to limit your risk is to buy a call option with a strike price (at which you can buy back the storck) that is quite a bit higher than the stock's current price.  This option won't cost you much, but will limit your potential loss if the stock keeps going up instead.  For example, if you sell short 500 shares of stock that is trading at $55/share, you can buy 5 call options to buy this stock at $70/share.  It will not cost you much at all, but it also reduces your potential loss from having no limit to being capped out at $15x500=$7,500.\n\nAlso, to sell a stock short you'll need to have a margin agreement signed and approved by your broker firm.
155105
If you hold the stock for more than a year.. you have two rates:\n\nThe 5% Rate\nWho's Eligible: Individuals in the 10% and 15% federal income tax brackets with net long-term capital gains from selling investment securities held for more than one year. \n\nThe 15% Rate\nWho's Eligible: Individuals in the 25% federal income tax bracket or higher with net long-term capital gains from selling investment securities held for more than one year. \n\nLess than one year, then it's taxed like ordinary income and just goes into the income pot.  No income tax break.
282078
Your accountant has to fill out a schedule D for your trading transactions.  It must list every transaction individually.  That is why it is necessary.  Because of this, some brokerage firms now have downloadable 1099's that interface with tax software.  Eventually they all will.\n\nGood luck.