U.S. Withdraws Offer of 60,000 Job-Based Visas, Angering Immigration Lawyers - New York Times

U.S. Withdraws Offer of 60,000 Job-Based Visas, Angering Immigration Lawyers - New York Times

Tax Time - ESPP hell tax rules

II. QRS SHARES PURCHASED PURSUANT TO THE EMPLOYEE STOCK PURCHASE PLAN

Q. How will I be taxed upon the disposition of my ESPP shares?

The cash out (or open market sale) of any QRS shares you purchased under the ESPP will constitute a disposition of those shares. Your federal income tax liability upon the

---

cash out (or open market sale) of the ESPP shares will depend on whether you make a qualifying or disqualifying disposition of those shares. A qualifying disposition will occur if the cash out of those shares in the Merger (or open market sale) is made (i) more than two years after the start date of the offering period in which those shares were purchased and (ii) more than one year after the actual purchase date of the shares. A disqualifying disposition is any sale or other disposition which is made before both of those requirements are satisfied.

Q. How will I be taxed if I make a qualifying disposition?

If your ESPP shares are cashed out in the Merger (or sold in the open market) in a qualifying disposition, you will recognize ordinary income per share at the time of the applicable disposition (the open-market sale or the cash-out upon the Merger) equal to the lesser of (i) the amount by which the $7.00 cash payment per share in the Merger (or the amount per share received upon the sale of the shares in the open market) exceeds the purchase price paid for that share or (ii) fifteen percent (15%) of the fair market value of the share on your entry date into the offering period in which that share was purchased. The amount of such ordinary income will be reported by QRS on your Form W-2 wage statement for the year of the disposition. Any additional gain will be long-term capital gain.

If the $7.00 cash payment for the share (or the price at which the share is sold in the open market) is less than the purchase price you paid for that share, there will be no ordinary income, and any loss recognized will be a long-term capital loss.

Example: Assume that you entered the ESPP on the November 1, 2002 start date of the offering period, when the fair market value of the stock was $5.46 per share. Assume further that on the April 30, 2003 purchase date, 100 shares of stock are purchased on your behalf at a price of $4.39 per share when the fair market value was $5.17 per share. If the Merger occurs more than two years after the start date of that offering period and more than one year after the actual purchase date, then the cash out of your shares at $7.00 per share will be treated as a qualifying disposition. Accordingly, the federal income tax treatment of your $2.61 profit per share will be as follows:

Ordinary Income Per Share		The lower of (i) 15% of the $5.46 fair market value per share on the start date of the offering period ($0.82), or (ii) the excess of $7.00 per share selling price over the $4.39 per share purchase price ( $2.61) = $0.82 per share
Long-Term Capital Gain Per Share		$7.00 per share selling price less $5.21 ($4.39 purchase price plus $0.82 ordinary income) = $1.79 per share

Q. How will I be taxed if I make a disqualifying disposition of my ESPP shares for an amount in excess of their fair market value on the purchase date?

If your ESPP shares are cashed out in the Merger (or sold in the open market) in a disqualifying disposition, you will recognize ordinary income per share at the time of the

---

applicable disposition (the open-market sale or the cash-out upon the Merger) in an amount equal to the excess of (i) the fair market value of the share on the purchase date over (ii) the purchase price paid for that share. The amount of such ordinary income will be reported by QRS on your Form W-2 wage statement for the year of the disposition. Any additional gain recognized upon the disqualifying disposition will be capital gain, which will be long-term if the share has been held for more than one year following the purchase date of that share.

Example: Assume that you entered the ESPP on the November 3, 2003 start date of the offering period, when the fair market value of the stock was $10.25 per share. Assume further that on the April 30, 2004 purchase date, 100 shares of stock were purchased on your behalf at a price of $4.52 per share when the fair market value was $5.32 per share. If the Merger occurs less than two years after the start date of that offering period or less than one year after the actual purchase date of the shares, the cash out of your shares at $7.00 per share will be taxed as a disqualifying disposition. Accordingly, the federal income tax treatment of your $2.48 per share profit will be as follows:

Ordinary Income Per Share		$5.32 fair market value per share on the purchase date less $4.52 per share purchase price = $0.80 per share
Short-Term Capital Gain Per Share		$7.00 per share selling price less $5.32 fair market value per share on the purchase date = $1.68 per share

Q. How will I be taxed if I make a disqualifying disposition of my ESPP shares for an amount less than their fair market value on the purchase date?

You will recognize ordinary income in the year of the disqualifying disposition equal to the excess of (i) the fair market value of the shares on the purchase date over (ii) the purchase price paid for the shares. The amount of such ordinary income will be reported by QRS on your Form W-2 wage statement for the year of the disposition.

Your tax basis in the purchased shares (the amount which you can subtract from the proceeds you realize upon the disposition of those shares in order to determine your taxable gain or loss) will be increased by the amount of ordinary income you recognize in connection with their disqualifying disposition. Accordingly, in connection with that disqualifying disposition, you will recognize a capital loss per share equal to the excess of (i) the tax basis per share over (ii) the $7.00 amount realized per share upon the cash out in the Merger (or such other amount realized in an open market sale). That loss can be used to offset any capital gain (whether short-term or long-term) you recognize in the same taxable year. Any remaining capital loss may then be applied to offset up to $3,000 of ordinary income ($1,500 for a married person filing a separate return) per year.

To the extent that you have a remaining capital loss after such an offset to your ordinary income, you may carry the remainder forward to an unlimited number of subsequent taxable years to offset future capital gain and up to $3,000 of ordinary income ($1,500 for a married person filing a separate return) per year until that loss is exhausted. Because the capital loss limitation prevents you from applying all of your capital loss as a deduction against your

---

ordinary income in a single taxable year, you may have to recognize ordinary income in instances where you have otherwise sustained an economic loss.

Example: Assume that you entered the ESPP on the May 1, 2003 offering period start date, when the fair market value of the stock was $5.38 per share. Assume further that on the October 31, 2003 purchase date, 100 shares of stock were purchased on your behalf at a price of $4.57 per share when the fair market value was $10.17 per share. If the Merger occurs less than two years after the start date of that offering period, the cash out of your shares at $7.00 per share will be taxable as a disqualifying disposition. Accordingly, your federal income tax treatment will be as follows:

Ordinary Income Per Share		$10.17 fair market value per share on the purchase date less $4.57 per share purchase price = $5.60 ordinary income per share
Short-Term Capital Loss Per Share		$10.17 fair market value per share on the purchase date less $7.00 per share selling price = $3.17 short-term capital loss per share

You will recognize ordinary income in the amount of $5.60 per share in connection with the disqualifying disposition of ESPP shares. As a result of that income recognition, your tax basis in the purchased shares will be increased to $10.17 per share, and you will also recognize a capital loss of $3.17 per share as a result of the disqualifying disposition at $7.00 per share. To the extent that you are unable to use the $3.17 capital loss per share to offset other capital gain and $3,000 of ordinary income ($1,500 for a married person filing a separate return) in the year of the disqualifying disposition, that loss can be carried forward to future taxable years.

A Star Is Made - New York Times

A Star Is Made - New York Times

The Other Immigration - New York Times

The Other Immigration - New York Times

You are visiting a site outside of the Sulekha Global Newshopper

Lobbying for green card!

Kaumudi Special

Kaumudi Special

Not Far From Forsaken - New York Times

Not Far From Forsaken - New York Times