Can I take a capital loss for underwater stock options?

September 26, 2011

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?


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, “Executive Tax and Financial Planning For Non-Qualified Stock Options”.

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