WONDERFUL WORLD OF WARRANTS

[jtomm]

Re holding time to get long term cap gains after exercising a warrant. I'm not a tax professional either, but I'm almost certain the basis date for determining long term capital gains is the date you EXERCISE the warrant (same is true of an option), not the date you purchased the warrant. So if you exercise on Sep 25, 2025, you'd have to hold until Sep 26, 2025 to get long term cap gains treatment.

If you buy the warrant, hold for more than a year and then sell the warrant (rather than exercise), you get long term cap gains treatment on the warrant. The warrant is treated as it's own separate financial instrument for tax purposes.

But if you exercise, then for tax purposes it becomes part of the acquisition of the stock. Let's say you bought the warrant 10 months ago, then exercise and sell the acquired stock 3 months later, you do NOT get cap gains treatment. You would have to hold the acquired stock for more than a year after the exercise date.

So essentially, exercising starts a new one-year clock.

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