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To: Exacctnt who wrote (71159)	11/30/1999 12:52:00 PM
From: Exacctnt	Read Replies (1) of 132070

I want to amend my previous post dealing with the tax credit. I wrote:<<<Likewise, the tax credit received by the company from the employee exercising the shares figures into the calculation by using the amount from the tax credit as an offset to shares outstanding in the EPS calculation. In the above example with 1000 options outstanding, and the exercise price being $20, the company will be able to claim a $7,000 tax credit (assuming a 35% tax rate)upon the exercise of the shares. That $7k credit can be used to buy back 70 shares of stock so the number of shares used in the EPS calculation is further reduced by 70 shares.>>> The above statement is not correct. The tax credit received by the company is not calculated based upon the exercise price ($20). Rather, it should be calculated based upon the gains the employee receives on exercise. In the example, if the market price at the time of the calculation is $100 and the exercise price is $20, the gain to the employee is $80. Taking (shares X gain X tax rate of 35%) equals $28k tax credit. This amount reduces the shares used in the EPS calculation by 280 shares not 70. Sorry for the confusion.

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