Options Trading Tutorial

I purchased both ISO and Non Qualified stock options and held for over a year before selling a portion.?

(no disqualifying disposition) My broker combined the total quantity of shares into a single account; therefore there is no record of which type is sold. I sold a protion of the shares and now I do not know which one I am responsible for reporting on my tax return. Iso shares are treated different than non qual shares. Does anyone know what shares I need to report on my tax return? I was caught up in the AMT on my 2006 return because of the purchase and holding of the ISO shares in 2005.

Public Comments

1. Talk to your accountant. I'm pretty sure that you can choose which ones you want. Typically, the shares from the NQSO options will have a tax basis equal to the fair market value at the time of exercise, while ISO shares will have a tax basis of the strike price. That would mean that you would prefer to sell the NQSO shares first -- since they have a higher tax basis, meaning a lower capital gains (so lower taxes now). However, if you were subject to the AMT when you exercised the options -- that may have reset your tax basis to the fair market value. If that is the case & you exercised them all together, then youwould be indifferent to which ones were sold. That is why you need to talk to your accountant.