Should I sell stock to recognize losses after exercise?

July 13, 2005

Date:   Tue, 5 Jun 2005
From:   Ed

Hi Michael,

If I want to hold the stock after exercising ISOs, should I sell some stock to recognize losses to offset the gain from the exercise? Is the $3,000 capital loss deduction allowed when computing the alternative minimum tax?



Date:   Wed, 06 Jul 2005

Hello Ed,

Yes. Remember the additional income reported relating to the exercise of an ISO is ordinary income and not capital gain eligible for offset by capital losses. Capital losses are deductible when computing the regular tax and the AMT up to the amount of capital gains plus $3,000.

Good luck!

Mike Gray

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

Comments are closed.