Berkeley CSUA MOTD:Entry 18011
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2025/05/25 [General] UID:1000 Activity:popular
5/25    

2000/4/14-15 [Finance/Investment, Reference/Tax] UID:18011 Activity:nil
4/14    When I purchase company stocks with 15% discount through Employee
        Stock Purchase Plan, is the 15% difference considered capital gain
        subject to short/long term capital gain tax when I sell the stocks?
        Thanks.
        \_ of course it is. Your capital gain is the price you sold minus
           the price you paid.
           \_ I thought the 15% is considered regular income?  No?
        \_ I read in the San Jose Mercury News that Congress is trying to pass
           a law to try to tax that 15% percent.  This was 6 months ago.
        \_ The laws are complicated for this stuff.  There is some effort in
           Congress to simplify the law (read: tax you more), but this is the
           basic idea:
           1) If you sell the stock too quickly, it is a disqualifying
           disposition, and you have to pay taxes as ordinary income.  (For me,
           that's within two years of the grant date of the stocks, and I assume
           it's two years for you, but don't know.)
           2) After that, it gets more complicated.  Our literature says: "you
           will recognize as ordinary income an amount equal to the lesser of:
           a)  The excess of the amount you realize upon the sale of the stock
           (Sale Price) over the price (Purchase Price) you paid for the stock;
           or b)  15% of the Grant Date Value."  Yeah, it's complicated.  Your
           company should be able to give you specifics.  -emarkp
          \_ I sold a bunch of ESPP stocks last year for a down payment of
             a new car. I'm going to be paying bazillions in taxes this year
             due to the fact that (yes, Virginia) capital gain is calculated
             according to your purchase price (i.e. incl the 15% discount) and
             your sale price. If you buy ESPP stocks every month (assuming you
             do) through automatic deduction, you need to keep track of how
             much you buy and when. Luckily, your latest ESPP statement should
             have all that. If you use TurboTax, it will ask you to enter
             EVERY single one of purchase transaction. Just punch in the
            numbers and it'll calculate it for you. OH, and one more thing,
             in addition to the 20% cap gain tax (if you didn't sell until
             after a year of purchase) you will get hit by CA state tax since
             proceed of your sale is treated as ordinary income. Sucks huh??
2025/05/25 [General] UID:1000 Activity:popular
5/25    

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