I think that no matter if you sell the stock or not, the difference between the stock price (when you exercise the option) and the option strike price is always ordinary income.
A lot of people seem very confused about options, but they aren't that difficult. Let's say you have been granted options for your stock at $100. On the day you exercise your option the price of the stock is $120. You pay $100 for the stock, and have $20 of ordinary income. The cost basis for the stock is now $120. If you later sell the stock for $200 you have $80 of capital gains (long-term or short term, depending on how long you hold it).
Correct. You either pay full income tax on the whole thing, OR you hold the stock and sell it later and pay capital gains tax on the accrued value after your got the stock. Bottom line is you always pay at least some income tax, and usually (because few people actually buy and hold the stock) pay income tax on the whole thing, and never get to leverage any appreciation in value as a capital gains tax rate.
No, stock options are almost always taxed as ordinary income. The basis of a stock option is not set until you exercise the option. With a stock option, you own NOTHING. It is simply a promise by the company to sell you stock at some future date at a fixed price - there is no value to you in that promise, until you exercise the option.
When you exercise the option, you then establish a cost basis of an actual item of value (the stock). Since few people have the money to actually buy their stock outright, they tend to sell the stock on the same day as they exercise the option. Cash out, so to speak. And thus actual ownership of the item - the stock - was less than 365 days, and so it is taxed as ordinary income, not long-term capital gains.
Rarely does someone pay capital gains tax on stock bought via a stock option. You have to pay for the option itself up front, then hold it for at least 1 year. Most people don't have hundreds of thousands of dollars lying around - so they exercise the option and sell the stock on the same day. No money out of their product, but the profits are taxed as full ordinary income (and, because of the values, typically in the several hundred thousand dollar range, the majority is at 39% Federal - and in the state of California, usually 12% State as well).
You're someone who never cashed in options, are you? When you have the options - they have potential value, but no real value until exercised. Then you get to pay income tax on the realized gains of those options (because they are realized in less than 1 year time - you typically exercise and sell on the same day, or at least within a week).
Now, you CAN take out loans against the value of your options, if the options are for publicly traded stocks. But then you're essentially mortgaging your future for payments today, and hope that the value of the stock continues to increase. If it doesn't - you get into really bad financial situations really quick. And even if that's not the case, the loan may be considered as income by the IRS and subject to full income tax.
OK, so there was this time that one or more persons may have done something, and one or more other persons had a reaction.
Thank you very much, I'll be here for a duration. Try the soy based meal!
On their devices, they control the entire technology stack: from hardware to software, it is all theirs. And they are the only player who has this sort of position that allows paradigm shifts to be done in-house.
Other than Microsoft with an OS and Surface. Or Google with an OS and Nexus devices. Or Samsung with an OS and dozens of different mobile devices. But other than that, Apple is the only play with control of the entire technology stack!
Life would be so much easier if we could just look at the source code. -- Dave Olson