Gore bought and added the 59,000 underlying shares (worth $29,500,000 today) to his prior holdings. This was a simple exercise (not a cashless exercise), but there are several nuances. First, unless you assume he is as gumptarded as the unhedged shorts on this board, it is obvious that the BOD members had no idea the stock was going to be pounded to such uneconomic levels since October or he would have surely exercised these old options last year. Second, the old rules for inclusion of the ITM portion at exercise in AMT (but not ordinary income) will be far better this year than last. Third, when ISOs are sold, the ITM portion at time of exercise will be included in ordinary income, and the sale price excess over the market price at the time of exercise (so here, $500) is the capital gains portion.
So, beyond having good tax counselors, why would a board member buy and hold all of those beauties today? Do you think maybe Al has a good idea of what is coming up for AAPL and that he believes the downside is washed out? I'll suggest he did it for one reason only: he thinks the stock is going alot higher from here and he wants as much of the the end game gain to be in the form of LTCG. Read that slowly if you are not a numbers/tax oriented player, but this is a very comforting data point... and certainly more informative than maybe AAPL is swithcing big pad screen suppliers, changing the configuration/glass, has all the iPad 4 inventory they need for the schedule run, or whatever. We're pretty sure they will continue to make a full sized iPad. LOL
you don't know what you're talking about........he did not 'buy and add'.......he exercised his option on 59000 ~$7 options given to him over 10 years ago by jobs, as a board member.......he spent ~440K to reap ~30m in the transaction......done, he's out of aapl altogether.......got it?
I did not see your ignorance here before pointing out your ignorance below. To be clear, you are absolutely incorrect and apparently stupid arrogant and pompous.
Gore did not sell out of the shares. Go study the Form 4 if you know how to find it... then you will not be so clueless. Then go read everything i wrote and see if you don;t find yourself going something like, "Wow, I think i get it now. I need to change my alias so I don't have to post as the #$%$ who gave tracker S when tracker actually shared very worthwhile, illuminating info on this topic."
Done making fun of #$%$ trying to dis me now... I hope at least some longs understand my point and I don;t care what Jonny lunch bucket short does with his Dell. LOL
Since he is not an employee but a director would not these options be nonqualified and as such owe the difference between the exercise price and the market price in ordinary income tax for 2013?
there are qualified and non-qualified ISO's. I only had non-qualified since I wasn't mgt. Qualified have different rules. he has to pay tax on the difference of the option prices (8 bucks) vs. the exercise price (485 say). then if he holds those shares (vs doing cashless sell), he either has a short term gain (less than 12 months) or long term gain if he sells those shares at a price higher than the exercise price of 485. Hope this helsp. This is really encouraging.
Why do you think he exercised early the very day the stock his 485. If the tax treatment is that he has to pay the difference between the exercise price and the market price for the day of exercise as ordinary income. his incentive is to minimize taxes by picking the low price. Any tax experts out there?
yes, with options you have 3 choices. cashless sell so he has options at say $8 and it's $488, he gets $480 per share and pays ordinary income tax on that depending on his bracket. The 2nd is buy/hold all shares and he has to pay taxes on that $480 gain per share. Then if he holds those shares a year, that difference when he sells from $480 is a capital long term gain. Short term is before 12 months. Now the 3rd is buy/hold/pay for taxes with shares. Here he buys the shares and sells enough to cover the taxes so he isn't out of any money from pocket. Thus, say he has 100,000 options. Cashless sell = sells all 100K options/shares. 2nd he has 100K shares but owes taxes on all shares. 3rd option say he holds 50,000 shares and sells 50,000 shares to pay taxes so he's not out of pocket any money. Hope this helps. I had options on two companies I worked for and this is how it goes (at least for lower level employees). hope this helps.
I am a recovering (inactive) CPA, and do not hold myself out as an expert, but one of my points was answering the question you asked...
To restate, when he sells, the delta on strike and market at time of exercise (not sale, exercise) will be taxed to him as ordinary income (aapl gets a tax deduction for that now), and the overline between the market price at time of exercise and the ultimate sale price is a capital gain (short term or long term depending on holding period).
Recapping, Al plan is to minimize ordinary income at 39.6% and have the upside from $500 be taxed at the new long term capital gains rate of only 20%.
He'll likely wait until it has run up a few hundred bucks and then donate enough to offset the taxes due on selling out the rest. It is a nice tax situation for the wealthy, no? And here is one of the world's biggest bleeding hearts taking advantage of it to MINIMIZE his future tax liability for adding no value to AAPL. LOL
Still, they key point is the buy and hold -- there was absolutely no reason to do that unless he thinks the stock is going materially higher after next week's earnings. Before selling your stock on bs rumors or uncertainty about next week, think this part through carefully: the ISO options on his 59,000 shares did not expire until March -- so if Al thought the stock was going to get hammered further, he assuredly would have waiting until AFTER earnings because that would have further minimized the portion of the ultimate total gain that would be taxed as ordinary income (39.6%) and maximized the portion of the total gain that would be subject to LTCG treatment at the new rate of 20%.
Grin all day into next week while the #$%$ short away.
That is very unsophisticated thinking. Read the whole post top to bottom and find yourself saying something like this to yourself: "Wow, I really learned something today. There are guys out there managing money that know a lot of things I have no knowledge about. I'm glad that guy shared that info today..."
Three times you make an #$%$ of yourself here on one thread? Longs can take comfort in the level of stubborn ignorance demonstrated by these short gumps saying I don;t know what i am talking about. Fun to think "brilliant" guys like that are shorting the stock down here at these uneconomic levels. LOL
Here's an excerpt from the EDGAR filing. For those incapable of processing what it says, prior to buying (and retaining -- read my series of posts again) 59,000 shares at $7.475/share, Gore had 2574 shares. He has sold none of his holdings and now holds 61574 shares in total.
2. Issuer Name and Ticker or Trading Symbol
APPLE INC [ AAPL ] 5. Relationship of Reporting Person(s) to Issuer
(Check all applicable)
X Director 10% Owner
Officer (give title below) Other (specify below)
3. Date of Earliest Transaction (Month/Day/Year)
4. If Amendment, Date of Original Filed (Month/Day/Year)
6. Individual or Joint/Group Filing (Check Applicable Line)
X Form filed by One Reporting Person
Form filed by More than One Reporting Person
Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned
1. Title of Security (Instr. 3) 2. Transaction Date (Month/Day/Year) 2A. Deemed Execution Date, if any (Month/Day/Year) 3. Transaction Code (Instr. 8) 4. Securities Acquired (A) or Disposed Of (D) (Instr. 3, 4 and 5) 5. Amount of Securities Beneficially Owned Following Reported Transaction(s) (Instr. 3 and 4) 6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4) 7. Nature of Indirect Beneficial Ownership (Instr. 4)
Code V Amount (A) or (D) Price
Common Stock 01/15/2013 M 59,000 A $7.475 61,574 D
Read this update only after reading the rest of my posts on this thread... but Gore's timing for this buy now as compared with after the 23rd will have the effect of saving him the difference between ordinary income tax rates (39.6%) and 20% LTCG rate on whatever the price differential is between his $485 exercise price and what the stock runs up to after earnings prior to when he would have needed to exercise the options at the latest prior to the March 2013 expiry.
So let's use Demark's (timing call) estimate that AAPL is going to run up 22% or to ~ $600 within a couple of weeks from that. Rounding down to just a $100 differential, that means, all else being equal, old fox Al Gore will save this much in taxes when he ultimately sells out the shares:
59,000 shares x (39.6 -20%) x $100 = $1,156,400. Not bad for a 1 week time shift, huh?
Thanks for the wink on earnings next week big Al. LOL
so if I was a short (I'm not as I'm long and just saying that if someone were short), then they'd be #$%$ in their pants come next week. You would think they would cover asap??? agree???
Tracker is correct. Gore could not have sold his shares even if he wanted to if apple is expected to miss earnings. SEC would have him in handcuffs and orange jumpsuit soon after. He still owns the shares.
Sentiment: Strong Buy