Experts - I understand tha LEAPS help with liquidity amd magnify the returns but I am unclear what are the tax implications (Fed LTCG and state tax) when you are ITM and exercise LEAPS. Can someone shed some light on tax implications of the LEAPS? Thanks.

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if the LEAP is provided in exchange for services than it is subject to IRC 83(b).

At the time of grant the recipient may have made an election to treat the receipt as ordinary income or capital gains.

If the former is selected then the intrinsic value of the options at expiry is the income expense that is booked to the period in which the option was granted. That expense is then "carried forward" according to a schedule that I'm too lazy to provide you with.

Otherwise there is 0 income expense.

if it's not in exchange for services then your gains are classes as cap gains

Not in exchange for services. I am buying it on Robinhood. Essentially, a long term call option for SPY expiring March 17 2023.

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Then the taxable event is exercise.

The gains are equal to the number of shares x (tick - strike)

- g

Does anyone ever exercise LEAPS? I have a few but really don’t plan on holding the stock. Just taking the ride up.

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