Can I deduct trading losses against gains?

July 23, 2001

Subject:   Losses Deducted from gains in Employee options
Date:   Tue, 28 Nov 2000
From:   Faisal

Can I deduct trading losses against gains I have when I exercised my non qualified employee stock options? If I made $100,000 on my employee options can I deduct $70,000 in other trading losses?



Date:   4 Dec 2000

Hello Faisal,

No. Most trading losses are capital losses, which are deductible up to the amount of capital gains plus $3,000. Any unused capital loss deductions may be carried forward indefinitely.

The income from exercising non-qualified options is not capital gain, but additional compensation income, so it doesn’t qualify for offset by capital losses.

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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