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Purchase also starts the clock for determining the difference between long- and short-term capital gains. This is (currently) a big deal for federal income tax.

Taxes on the difference between the purchase price and the "value" on the purchase date is what caused a lot of people problems during the dot-bomb. They exercised in the money options, owed taxes, and couldn't pay them when the stock price dropped. (Many of them were trying to hold out for long-term capital gains rates. Oops.)

Note that CA taxes both long- and short-term capital gains at the same rate. Jim Clark says that's why he no longer lives in CA.




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