MT: ESOP ESPP queries

LLLLWhenR2I · Post by **LLLLWhenR2I** » Thu May 24, 2007 12:49 am

We will use this thread for discussion on ESOP and ESPPs. For tax related questions on ESOP and ESPPs, the following thread is better suited - MT: US Tax on Employee Stock Options & ESPPs

Use this thread for general questions on ESPP and ESOPs

TAT

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Help in understanding ESP-Employee stock ownership Plan.

Some highlights

Question: What is meant by "Lower fair market value". Is the lower price of the two dates. (May 15 and May 14 of following year)?

If above is true then it seems to be a very good plan if the stock increases between the year and at the same time no loss if the stock value decreases since the purchase will be made at the lower price. Of course if the stocks dips to low on May 14th of next year and and further dips to a very low on may 15th of next year, then the losses come into picture.

With this post I just want to validate my understandings.

shoonya · Post by **shoonya** » Thu May 24, 2007 1:49 am

LLLLWhenR2I;25847Help in understanding Question: What is meant by "Lower fair market value". Is the lower price of the two dates. (May 15 and May 14 of following year)?

Yes, that is usually the case with ESPP (employee stock purchase plans). Price on 1st and last date is compared. Which ever is lower of these two is used for grant price.

We actualy get a 15% discount on top of of lower price.

If you sell the next day itself - it will be considered for short term capital gains.
You need to wait one year after 14th of next year for sellingto be considered for long term capital gains. Please verify this with your company's benefits department.

LLLLWhenR2I · Post by **LLLLWhenR2I** » Thu May 24, 2007 5:37 am

Thank you Shoonya and Meranaseeb

zebra_crossing · Post by **zebra_crossing** » Fri Jun 15, 2007 10:30 pm

Hi All,

We are R2iing in 1 week...

I have an urgent query related to ESPP and ESOP sales. I am currently GC holder and plan to maintain residency and apply for citizenship in 1.5 years.

I have about 20k in stock options that I have to exercise ASAP or I might lose them. Should I cash it out or should I sell to cover and hold ? Are there any tax advantages either way ?

Also, I have about 12k from ESPP which I have purchased over the years. Should I sell these or keep them ?

Not very savvy financially, and not much time on my hand to make these decisions ... any pointers /help is sincerely appreciated.

Thanks and regards - zc

kumar_09 · Post by **kumar_09** » Sat Jun 16, 2007 1:11 am

I assume your ESOP is NQSO. In that case, the best thing is to sell it and take the cash. Think about it another way: if you had the cash, would you go ahead and buy your company stock? If NO, then take the cash from options. For ISOs, there may be tax advantages to buy and hold, but beware of AMT.

ESPP: Atleast sell the qualified ones and diversify.

PS: I don't consider myself financially savvy either, but this is what I would do in your situation.

welcome10001 · Post by **welcome10001** » Sat Jun 16, 2007 7:39 pm

zebra_crossing;29356Hi All,

We are R2iing in 1 week...

I have an urgent query related to ESPP and ESOP sales. I am currently GC holder and plan to maintain residency and apply for citizenship in 1.5 years.

I have about 20k in stock options that I have to exercise ASAP or I might lose them. Should I cash it out or should I sell to cover and hold ? Are there any tax advantages either way ?

Also, I have about 12k from ESPP which I have purchased over the years. Should I sell these or keep them ?

Not very savvy financially, and not much time on my hand to make these decisions ... any pointers /help is sincerely appreciated.

Thanks and regards - zc[/quote]

Assuming the stock is worth holding for atleast another year, u should hold since there is no tax on capital gains for NRA(US Tax) and also in RNOR no tax in india

zebra_crossing · Post by **zebra_crossing** » Sun Jun 17, 2007 1:08 pm

Thank you for your responses ...

Reg response in message # 4 : I will be filing as US resident since I am currently having GC- don't believe I can benefit from any tax advantages for NRAs.

Yes, ESPP is non qualified stock options. From what I understand, it might be good to sell these off. (dont think these have any time limit or expiry since technically I have paied for it)

ESOP is ISO and are at different strike prices. Maybe I must sell out the ones with high strike price and buy and hold the ones that are at a lower strike price. That avoid me having to put money from my savings to buy and hold these stocks...

Does this plan sound ok ? Please advise.

Thanks in advance

zebra_crossing · Post by **zebra_crossing** » Sun Jun 17, 2007 1:13 pm

I also had 2 slightly different questions

1) since US residents have to report global income , how do we report earnings in India ? Also, how much tax is payable to US ?

2) Is it advisable to open FCNR or NRE FDs for savings before leaving US ? Will that help with taxes in India (I checked with ICICI and they confirmed FCNRs are not taxed till maturity even if the account holders return before maturity)

If anybody has contact # of reliable financial advisors in Bangalore, please pass it on. I obviously sound like I need one ;-)

welcome10001 · Post by **welcome10001** » Sun Jun 17, 2007 7:58 pm

zebra_crossing;29534Thank you for your responses ...

Reg response in message # 4 : I will be filing as US resident since I am currently having GC- don't believe I can benefit from any tax advantages for NRAs.

Thanks in advance[/quote]

since u are r2i'ing in a weeks' time u will be a NRA for next year(2008). That is where u will save captial gains by waiting to sell until next year.

zebra_crossing · Post by **zebra_crossing** » Mon Jun 18, 2007 6:25 am

Welcome0001,

GC holders should file as residents and not as NRA ...can anybody pls confirm ?

Thx