The legalese of taxation after exercise of warrant:
There are numerous references on the Internet, which attempt to describe a tax liability when an owner exercises a stock warrant. Authors who have a penchant for exhibiting their legalese, instead of giving a clear understanding of the process, write most of them. To make the understanding even more confusing the authors attempt to describe taxation of options and warrants without much differentiation between the two, stating that understanding the language and intent in the IRS publication is also unclear. To make matters worse, there are different types of warrants.
Whether the information I posted on the topic of ‘Tax at Exercise’ is correct or incorrect, I selected the reference I posted to this topic because it parallels what Don was describing in his last post (#409026), and because the author wrote it at a ninth grade level of reading comprehension.
If the information were correct, KKR would be prudent to exercise their warrants as close as possible to their strike price to avoid paying a higher tax rate based on normal income. If they exercise the warrants at the strike price, all they have to do is hold the stock for a year and a day to qualify for Capital Gains tax, which is 15% instead of a higher rate based on normal income.
As stated by WithCatz, anything that affects KKR affects WMIH, and particularly anything that affects the relationship between the two.
WMIH has a plan that does not include keeping us informed, but they know exactly what they and KKR are doing. Until the events unfold according to their schedule, and according to their reasons, as always, we wait.
Anon.
Best regards,
David West
