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No, you realize ordinary income tax on the spread, which is payable in full in the year realized (or in the year to which it is deferred under this measure) whi
by grellas 10y ago
No, you realize ordinary income tax on the spread, which is payable in full in the year realized (or in the year to which it is deferred under this measure) while the loss of the stock value is a capital loss, which can only be offset against other capital gains or deducted at the rate of $3,000 per year. So you could easily have a situation in which you realize tens or hundreds of thousands in ordinary income on which you must pay tax and have only the ability to deduct $3,000/yr against that income, i.e., a tax disaster.
- edoceo 10y ago$3k/yr, right? So your loss offset in taxes plays out over a long period of time (like from 2001-2015, for your 2000 return)
- grellas 10y agoYes, that is correct and thanks for pointing out that I had not included the "/yr" after the $3K. I have now corrected it in the comment above. So, yes, you keep carrying any capital loss of this type forward until you get to deduct the whole thing over time, either at $3k/yr or as an offset against future capital gains.
- dllthomas 10y agoThen that very much seems like the missing piece here...