When you exercise an employee stock option, Quicken adds an Exercise transaction to your investment transaction list. This "creates" the cash that makes up the difference between the stock's market value and your discounted purchase price. The Exercise transaction corresponds to a transaction typically done at your brokerage that does not appear on your statement. In this way, Quicken accurately tracks your true cost basis. If you download transactions from your brokerage, be aware that they may use different methods for tracking your discounted purchase price.
- Open the account you want to use.
- Click Enter Transactions.
- In the Enter Transaction list, select Exercise Employee Stock Option.
- Click Launch Wizard.
- Follow the on-screen instructions. Click Next to navigate through the windows. If you need more information, click a topic below to learn more.
- Date
Specifies the date on which you want to exercise some or all of your available options or on which you buy shares at the predetermined exercise price. Fair market value is determined by the stock price on this date.
- Which grant?
Click to select the grant you want to exercise. If you have more than one, identify the one you want to exercise by its grant date.
The grant date is usually determined by your employer. You must tell Quicken your grant date when you set up an employee stock option grant.
- Type of grant
Click to select the type of grant you have.
There are two types of employee stock options: qualified (or incentive) and nonqualified. The difference between the two is important for tax purposes when you exercise your options and sell your shares.
- Type of transaction
Select the type of exercise transaction you want to create.
In many employee stock option plans, you can exercise your options (buy the stock) and then either hold the shares or sell them the same day. The tax implications depend upon whether and how long you hold, as well as the type of stock option you have: qualified (or incentive) or nonqualified.
Refer to your employer's stock option plan or consult your tax advisor for more information about the tax implications of your exercise.
- Same day sale
- Enter the number of shares you want to exercise.
- Enter the price at which you sold these shares. (Confirm the sale price after your broker has executed your order.)
- Enter your broker's commission.
- About the tax consequences of same day sales
For nonqualified stock options, if you exercise the option and sell the stock on the same day, you're generally taxed on the difference between the option price and the sale price value on the day you exercise your option. This amount is taxed at ordinary income tax rates.
For incentive (qualified) stock options sold less than a year after exercising the option and less than two years after the option was granted, at least some of the gain is taxed as ordinary income, while the remainder is taxed as short-term gain.
Your taxes may vary based on your employer's stock option plan and your individual circumstances. Consult your tax advisor or the Internal Revenue Service.
- Same day sale account
Use this dialog only if you're exercising and selling on the same day.
- Enter the account from which you want to your options (buy shares).
- Enter the account into which you want to deposit proceeds from the sale.
- Exercise and hold
- Enter the number of shares you want to exercise.
- Enter the fair market value price of this stock on the day you exercise. This is usually the closing price on the day you exercise. Confirm the fair market price after your broker has executed your order. The tax implications of the fair market value depend on which type of option you have: qualified (or incentive) or nonqualified.
- Enter your broker's commission.
- About the tax consequences of exercising and holding
For nonqualified stock options, if you exercise the option and hold the stock, the fair market value on the day you exercise becomes your cost basis, and any appreciation on this price will be taxable as a capital gain when you do sell.
For incentive (qualified) stock options, the gain on the sale of stock from incentive stock options is taxed as long-term gain only if you sell the stock more than a year after exercising the option and more than two years after the option was granted.
Your taxes may vary based on your employer's stock option plan and your individual circumstances. Consult your tax advisor or the Internal Revenue Service.
- Exercise and hold account
Enter the account from which you want to exercise your options (buy shares) and hold the stock.
- Summary
- Review your transaction. Click Back if you need to edit a previous entry.
- Click Done.
Notes
Recording a transaction in Quicken does not execute a real-world trade, transfer, or other transaction. Contact your broker to execute trades or transfers, and then manually record the transactions in Quicken—better yet, download them directly from your participating financial institution.
