Stock options exercises.

Anthony gnucash at
Thu May 24 10:35:45 EDT 2007

On 5/23/07, Alan Su <su.alan at> wrote:
> David,
> i think you're asking how to account for the cashless
> exercise-and-sell transaction, rather than how to account for the
> value of unexercised options.  if you do in fact mean the latter, this
> probably won't help.
> first of all, IANAA...this is just my understanding from presentations
> by my company's HR folks.  first of all, from what i've been told,
> even with a cashless exercise, there may be differences between the
> share price at the point when you exercise and the price at the time
> when your just-purchased shares are actually sold.  the upshot is that
> you may realize a very small amount of capital gain/loss.  so, i would
> think about the following variables:
>   n: number of options you will exercise
>   x: strike price of those options
>   p: share price at the moment of share purchase
> p': share price at the moment of share sale
>   f: any fees associated with the xact
>   t: taxes withheld
> absent any other factors and assuming p'>p (i.e., capital gains were
> realized), i think the entries you want to make to are something on
> the order of
> Assets:Checking        n*(p'-x) - f - t
> Expenses:Fees                         f
> Expenses:Taxes                        t
> Income:EquityComp                          n*(p-x)
> Income:CapGains                           n*(p'-p)
> i'm not sure if this is "proper" in any rigorous accounting sense, but
> it makes sense to me!

I'm assuming nonqualified options here.

The transaction fees (SEC fees/commissions) should count toward the short
term capital loss (it's almost always a loss in my experience).  Treatment
of withheld taxes is beyond the scope of this explanation if you're trying
to use the accrual basis - they should be treated however you treat your
taxes withheld from you paycheck.  Other than those minor details, looks
right to me.

p is the fair market value on the date of exercise
n*(p-x) will show up on your W-2 under code V
n*p' will show up on your 1099


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