Companies that gave options but low salaries must cope with employees soured by the market downturn. In some cases, they re allowing workers to hand over their options in exchange for fresh options the company gives out after a six-month period. That time frame avoids a Financial Accounting Standards Board ruling requiring firms to take expensive charges for repricing options. Such reissuing of now-worthless options is criticized by investors who note that the practice is costly to the company. They say it also gives employees incentive to root against the stock in the hope that it remains depressed until they get their new options.
Tax is another worry.
The next year they had a big tax bill because the tax is based on when you exercised, not the current price. With incentive stock options, the paper profit isn t counted for normal income tax purposes and the growth can qualify for favorable capital gains rates if shares are held more than a year. But using incentive options to buy company shares triggers the alternative minimum tax, a calculation designed by Congress to make sure the rich don t avoid taxes altogether. While everybody signs and ignores it, it does make good sense to seek professional advice. All rights reserved.