This article discusses the tax treatment of an employee’s income that derives from stock options, specifically the case in which an employee exercises non-qualified stock options without putting any money down. First, a digression. What is a non-qualified option? A non-qualified stock option is the most popular form of stock option given to employees. Basically,
Category: Investing Tax Effects
Capital Gains Tax Rates
While reading misc.invest.*, you may have seen people talking about “long-term gains” or “short-term losses.” Despite what it sounds like, they are not talking about investment strategies, but rather a potentially important part of the United States tax code. All this matters because the IRS taxes short-term and long-term gains differently. The “holding period” is
How to Compute Capital Gains
How to Compute Cap Gains Gains made on equities (i.e., stocks or mutual funds) are subject to capital gains taxes. In the simplest case, you bought a lot of shares (either stocks or mutual funds) at some date, made no further investments (took your dividends in cash), and finally sold the shares at some later
Capital Gains Cost Basis
This article discusses how to determine the cost basis of a security according to the rules of the US tax code. The most common need for the cost basis of a security like stock is to report the proper gain or loss when that security is sold. This article sketches the issues for the simple
Backup Withholdings
Once the IRS declares you a “Bad Boy” (for having underpaid or been negligent on your tax filings in other ways) they stick you with “Backup Withholding.” What this means, essentially, is that any firm that deals with your money in taxable tranactions is required to withhold (and submit to IRS) 31% of the proceeds