08-22-2007, 06:15 PM
[quote MGS_forgot_password]You don't pay taxes on stock options until you exercise them, I don't see how this is any different.
The difference is that a stock option is worthless until you exercise it. It's just a piece of paper that says you CAN buy stock @ x price at some point which may or may not come. Once you exercise the option there is real money on the table and that is when the IRS comes a knockin'
The ball here is treated like income, as if the guy won it in a contest, because he has ownership of it and there is a true market value for it based on the offers he has already received and the estimates from auction houses. It's not an investment where the capital gain/loss is unknown b/c he hasn't sold it yet. He didn't buy for the ball; he caught it. It was free. When you get something for free the entire value of that item is considered income. If you won an iPod you'd have to pay taxes on the value of the iPod, even if you used the iPod and did not sell it. Same deal here.
The difference is that a stock option is worthless until you exercise it. It's just a piece of paper that says you CAN buy stock @ x price at some point which may or may not come. Once you exercise the option there is real money on the table and that is when the IRS comes a knockin'
The ball here is treated like income, as if the guy won it in a contest, because he has ownership of it and there is a true market value for it based on the offers he has already received and the estimates from auction houses. It's not an investment where the capital gain/loss is unknown b/c he hasn't sold it yet. He didn't buy for the ball; he caught it. It was free. When you get something for free the entire value of that item is considered income. If you won an iPod you'd have to pay taxes on the value of the iPod, even if you used the iPod and did not sell it. Same deal here.