ESPP & Tax advice
 

I've read all the blurb thats says I have to pay taxes on the difference between the amount I bought them for and the amount I sold them for However things get confusing.


If the original offering was say $10 (with 15% off) then over 6months I paid in enough to by 100 shares at this price... then when I bought the shares I paid 8.50 for them whilst the price at that point (fair market value) was $20/share. On what do I pay WHAT taxes?

I confused... and kinda scared because I don't know what I'm gonna owe and I don't want to get into a pickle I can't afford.

thanks

andy

Re: ESPP & Tax advice
 

I guess no one else has an espp then?

Re: ESPP & Tax advice
 

Don't even know what it means....buy the latest Taxes for Dummies

Re: ESPP & Tax advice
 

espp = employee stock purchase plan.

you pay into a fund where you get the price of the stock at the lowest point over the 6months you're in the plan. At the point of buying you get 15% off that price.

Its a 15% short term savings plan thats currently performing at roughly 140% for me... which is nice.

For those who want to know.. the details are

normal income tax for the difference between stock price and bought price
capital gains for the difference between bought price and sold price.

Re: ESPP & Tax advice
 

I have that at my work - not currently contributing though. So if you re-invest the profit you make from stock sales back into your plan as further stock purchases, so you don't actually get any physical cash in hand, you'll still see a tax increase for the next tax year?

I was afraid of that.

Re: ESPP & Tax advice
 

You pay gains when you sell thell them :D

So if you have sold them . . you will pay on the gain $20.00 - $8.50=$11.50

Only when you sell them :rolleyes:

Re: ESPP & Tax advice
 

Not quite ... this is what I needed to check.

you pay the difference between purchase price on the day ($20 - $8.50) in standard income tax, no way around it, no cooloff period.

If however, between me buying the shares and selling them, the price went up to say $25 then I'd pay capital gains on the $5 difference per share, similarly I'd received capital loss if the price went down.

I had this confirmed on the phone with the IRS today.

Re: ESPP & Tax advice
 

what possible benefit is it to sell and then buy again the same stock?... unless of course in the interim (whilst you HAD cash in hand) the stock went down.

Re: ESPP & Tax advice
 

Well you answered your own question there, but I came across your response while browsing and thought it only polite to answer.

:)