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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs
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To: hueyone who wrote (2)6/10/2002 2:42:40 PM
From: rkralRead Replies (3) of 786
 
My thought is that corporations will want to continue to get the cash flow tax benefit from exercise of stock options that they are currently getting from Uncle Sam, so corporations will likely report the cost as determined by the difference between the strike price and exercise price to both shareholders and the IRS. I could be wrong though. What do you think?

I firmly believe, should Levin/McCain S.1940 pass, that corporations will loose the tax benefit. Why? I think viewing the intrinsic value (market price minus exercise price) of the option as compensation to the employee, from the viewpoint of the employee, is correct. But from the corporate viewpoint, it is not employee compensation expense. It is a phantom expense. There is no cash flow, as evidenced by its conspicuous absence from cash flow statements.

I could be wrong though.

You got your bases covered, don't you? :-)

All JMHO, Ron
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