When you exercise an NSO using a stock swap, the bargain element (the difference between the fair market value and the exercise price) is still taxed as ordinary income. However, the built-in gain from the shares used in the swap is not taxed immediately. The replacement shares carry over their original basis and holding period, while the new shares have a basis equal to the amount included in your W-2.
We exist so you don’t have to worry about money. For more than 40 years, we’ve taken the sophisticated, time-tested approach that many ultra-high net worth individuals use to help manage their financial lives and made it accessible to more families.
