tax implications on options


B

bob

My company is about to be acquired. I have both vested and non vested
options that will mature shortly, and it is a cash buyout. Does
anyone have any suggestions on how I can avoid all the profits to be
labeled as ordinary income?
 
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M

Mark Bole

bob said:
My company is about to be acquired. I have both vested and non vested
options that will mature shortly, and it is a cash buyout. Does
anyone have any suggestions on how I can avoid all the profits to be
labeled as ordinary income?

I wouldn't try to avoid the profits, I'd grab for all I could get,
regardless of how they are labeled.

You might get some favorable tax treatment if your options are qualified
incentive stock options (ISO), but the dual holding requirements for
capital gains treatment of ISO's don't apply to your situation as you
described it. You don't even state what type of options you have.

-Mark Bole
 
B

Bob Sandler

and it is a cash buyout.

You need to clarify exactly what that means. If they are
just buying out your options for cash, then you are not
exercising the options. It's the same as a bonus paid in
cash. It will be included in your W-2 wages and taxed as
ordinary income. There is nothing you can do to change that.

Ask the company if that's what they are going to do.

Bob Sandler
 
D

dpb

bob said:
My company is about to be acquired. I have both vested and non vested
options that will mature shortly, and it is a cash buyout. Does
anyone have any suggestions on how I can avoid all the profits to be
labeled as ordinary income?
Let them expire??? :) (Sorry, couldn't restrain myself...)

--
 
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S

Steve Pope

bob said:
My company is about to be acquired. I have both vested and non vested
options that will mature shortly, and it is a cash buyout. Does
anyone have any suggestions on how I can avoid all the profits to be
labeled as ordinary income?
The only clean shot I can see is if the acquiring company
has a deferred compensation plan, if their plan will let you defer
a large percentage of the compensation associated with
the options, and if you consider them reliable/creditworthy
enough that you want to do this.

These are three big ifs, but it's not impossible. Talk
immediately to those responsible, before you actually see
the cash.

Steve
 

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