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Technology Stocks : Qualcomm Incorporated (QCOM)
QCOM 163.33-1.0%3:59 PM EST
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To: rkral who wrote (119117)5/22/2002 10:58:53 AM
From: Stu R  Read Replies (2) of 152472
 
Ron,

Since the taxes paid by the employee didn't end up in Uncles Sam's pocket .. we can conclude that we really don't have single taxation with the tax credit. Therefore , the original premise, "to avoid double taxation" without the tax credit, is false.


I think you are not considering that the company effectively pays a corporate income tax by virtue of not being allowed a deduction for compensation expense on the options. If the company did not receive the credit the company would pay a higher income tax as a result of not deducting the compensation and the employee would pay tax on option exercise and therefore without the credit a double tax would occur. To straighten it out the company becomes whole with the credit and the employee pays the tax as it is with regular compensation.

Hope this makes sense.

Stu
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