Do I need to pay ordinary income AND capital gains taxes?
May 14, 2004
Date: Tue, 27 Apr 2004
I exercised employee stock options for approximately 73,000 shares in two different transactions over two days during December, 2003.
The person who is preparing my income tax returns for 2003 says that I will need to pay ordinary income tax on the gross proceeds from these transactions and capital gains taxes on top of that. This would amount to 75% of what I made from the transactions. She says that I actually did own the stock while the options were executed.
What is your take on this?
Date: Mon, 03 May 2004
Your tax return preparer should be aware that you receive a basis (cost for reporting tax gain or loss) adjustment addition for the ordinary income reported relating to exercising your options. (It sounds like you made same day sales.) When you add the ordinary income to the option price paid for the stock, it should result in eliminating virtually all of the capital gains for the sales.
Maybe its time to upgrade your choice for tax return preparation.