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Subject:   Inventive Stock Options Taxes...
Date:   Mon, 2 Jul 2001
From:   Cole

I am in the process of exercising and selling my stock options that were offered to me by my company. The taxes were not taken out by my company when I sold part of them. I know I will have to pay taxes on them at the end of the year. If I exercise and sell and then invest that money in a down payment for my home will this help with my taxes for the end of the year? Will I still have to pay taxes on the money earned from the stocks?

Thanks,

Cole

Answer

Date:   Mon, 9 Jul 2001

Hello Cole,

Just buying a home will not eliminate the tax relating to selling stock acquired using an employee stock option.

The mortgage interest for a principal residence is a good tax deduction for both the regular tax and the alternative minimum tax. Real estate taxes are not deductible for AMT.

You should consult with a tax advisor to determine how much tax you will owe and plan for having the funds available on April 15. It may be to your advantage to prepay your state taxes, but it depends on your situation.

Good luck!

Mike Gray

For more information about incentive stock options, request our free report, Incentive Stock Options - Executive Tax and Financial Planning Strategies.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.