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Politics : Ask Michael Burke
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To: Exacctnt who wrote (64891)7/21/1999 2:12:00 AM
From: Simba  Read Replies (1) of 132070
 
Exacctnt:

<<<Umbro, Regarding MSFT employee stock options.
<<What is the "tax benefit" mentioned above?>>
The tax benefit is provided to MSFT whenever an employee exercises an option. The gain to the employee is taxable to the employee, but MSFT receives a credit(reduction) to its tax liability. This credit lowers MSFT's cash usage, hence, it contributes to the cost of buying Treasury stock through its repurchase program. >>>

Why does the govt. give tax benefits to MSFT for the profits made by the employee due to the option exercise. Isn't it kind of like "deferred" salary (assuming the stock goes up; otherwise employee will not exercise) that MSFT has agreed to pay for getting the services from the employee. Does govt. give tax benefits to companies for the fixed portion (normal base wages) of employee salaries they disburse for services rendered ?

Isn't MSFT highly leveraged by selling naked puts (although it has a huge cash hoard ) if the stock market tanks like in 1929. Imagine the forced buying back of the stock at a high price for stock options which will be worhtless anyway under such a situation ! Sure one might argue that since most options will not exercised, but the seller of the put warrants still has to pay cash to the buyer, am I not correct ? (BTW I have never traded options, so enlighten me)
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