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Subject:  Re: Employee Stock Purchase Plan Question Date:  6/5/2000  8:39 AM
Author:  ShyCougar Number:  22372 of 106020

I'm not absolutely sure on this, but once the shares are purchased and in your brokerage account, doesn't that make them subject to whatever current rules there are in existence just as if you had purchased them yourself through your own broker on the open market? Somebody help me out.

What's different between purchasing any ol' stock through a brokerage and purchasing your employer's stock through an ESPP plan is the discount. If you sell your ESPP shares within two years of the grant date, the discounted amount will be reported on your W-2 as ordinary income.

For example, let's say the grant date is 7/1/99 when the FMV is $20 and the purchase date is 12/31/99 when the FMV on 12/31/99 is $22. If I get a 15% discount, I will purchase ESPP shares on 12/31/99 at a discounted price of $17 ($20 7/1/99 FMV minus 15% discount), giving me a $5 discount.

If I sell these shares for $25 after 12/31/00 (one year from purchase date) but on or before 7/1/01 (two years from grant date), $5 of the $8 gain would be the discount and taxable as ordinary income. If I sold these shares after 7/1/01, the entire gain of $8 would be LTCG.

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