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Date:   Tue, 23 Mar 2010
From:   Nancy

I retired last year and my NQSO had an expiration date of January 31, 2009. I tried to exercise them, but they were "underwater."

Can I take a capital loss on Schedule D for the excess of the grant price over the fair market value at expiration?

Answer

Date:   7 Apr 2010

Hello Nancy,

No. You had no tax basis or cost for the options because you didn't have taxable income when your received them.

Good luck!

Mike Gray

For more information about non-qualified stock options, request our free report, Non-Qualified 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.