Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next
Author: wtam Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121144  
Subject: Re: Options & Taxes Date: 12/9/2003 2:02 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
employee options/share grants are a tricky area...you will prob want to check with the company to be sure how to handle them, because the type that they are - and only the co can tell you that for sure - will detemine how they are handled.

for the most common type that i have seen, once there is no longer a substantial risk of loss (ie, in 2006 she could take possession of the shares and sell them and keep the proceeds even if she left the company), then the value of the shares at that date is taxable as income, whether she actually sells them or not. that amount becomes her cost basis and that is also when her holding period starts for determining long term or short term gains.

one interesting aspect that the employee can choose under certain circumstances, and this is not the common handling at most companies: once the grant is made, you can elect to treat them as taxable income immediately and pay taxes on their value in the current year. this is an election you make with the irs and i believe cannot be changed without their permission once you do so. however, the advantage is then that your holding period starts immediately. and, if in 2006 you expect the shares to be worth a lot more than they are today, it could make good sense because then all that gain will be subject to the long term capital gains rate in 2006 instead of treated as income. whether this makes sense for your situation given your expected income levels this year and in 2006 and the actual share value in 2006, only you can decide.

this is definitely one area where professional tax advice is a must.
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
Post of the Day:
Berkshire Hathaway

Brookfield Asset Management
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement