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I think purchasing an investment at below market value implies a subsidy and that subsidy is considered a gain, whether it's via options or not. The key here i
by phamilton 10y ago
I think purchasing an investment at below market value implies a subsidy and that subsidy is considered a gain, whether it's via options or not.
The key here is timing. In both cases you are buying the stock for $1, but in one case it's officially worth $100. Therefore, you have a taxable gain.
That much makes sense. What doesn't make sense is treating an illiquid value the same as a liquid one.
- bsbechtel 10y agoThis sounds reasonable, however that subsidy/gain is already paid for with the employee's labor, which cannot be recovered. Paying taxes on what is essentially a guaranteed gain sounds reasonable, but when it is a gain earned by putting in labor over several years, I'm not sure this is the best solution.
- phamilton 10y ago> subsidy/gain is already paid for with the employee's labor Salary is gain paid for with labor, and it is taxed. I'm not sure I follow your point.
- bsbechtel 10y agoYes, salary is paid for with labor, but a reduced rate that is offset with compensation in the form of stock options. You're correct that it is taxed, and the capital gains rate is lower than the salary tax rate. My comment was more an observation, but the thought hadn't been fully fleshed out.