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Staples, Inc. Message Board

  • dithot dithot May 6, 1998 12:46 PM Flag

    To Clear Up Capital Gain Misinformation

    I'm a CPA, and I'm long on SPLS. :)

    The
    cap gain rules are as follows:

    Investments
    (stocks, options, bonds, real property, etc.) held less
    than 12 months are taxed at the taxpayers own top
    marginal rate (could be 0% to 39.6%, depending upon the
    particular individual tax situation, i.e., what your
    Adjusted Gross Income [AGI] is, what other income/loss is,
    itemized deductions - basically all the other stuff in
    your tax return).

    Investments held more than
    one year and less than 18 months are taxed at a
    maximum rate of 28%.

    Investments held more than 18
    months are taxed at a maximum rate of 20%.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • Thanks for your insight. One more question, if
      you don't mind: I have options with a ten-year
      expiration from my employer. If I wait 18 months to
      exercise, is that long-term gain? Also, is there any
      difference between exercising them and cashing out vs.
      exercising and keeping the stock another 18 months? Thanks
      in advance for your help.

      • 2 Replies to bchbum_98
      • Sorry to cop out on this one, but the tax
        treatment depends upon the type of option you have
        (Qualified, Non-Qual, other). You should really consult a CPA
        who can get all of the case-specific facts and give
        you a specific answer. The _general_ rules are
        below:

        Generally, you're not taxed on an option to purchase your
        employer's stock at the current trading price (generally
        called an "FMV Option" for "Fair Market Value") until
        you exercise that option. Any gain (difference
        between the exercise price and the trading price of the
        stock when the option is exercised) is treated as
        compensation for services (i.e., wages), and is subject to tax
        at ordinary income rates. Thus, waiting 18 months to
        exercise generally doesn't affect the tax
        treatment.

        Now if you exercise and hold the stock for 12 or 18
        months (or longer), any appreciation in the stock is
        subject to the capital gains rates I discussed
        previously.

        I have to include this at the end at the expense of
        risking confusion: there are games you can play with the
        IRS and stock options that would affect the tax
        treatment described above. These techniques involve risk
        and you've got to hire competent tax advice (not
        cheap). But if you've got a ton of money in options, it
        might be worth a look.

      • to 23 5/8 this A.M. Any news that I missed or just following the market trend????

    • for cap gains numbers. I did not have the "less
      than 12 months" part straight. Thought it was just 28%
      and 20 %. Hope the earnings numbers for SPLS are good
      on May 14. Bought more yesterday at 25 7/16. Oh
      well. I have alot of confidence in this company.
      Consistantly strong quarters. That's what you look for in a
      good investment.( And what a 5 year chart, too!!)

 
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