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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: EnricoPalazzo who wrote (52110)7/15/2002 7:16:30 PM
From: paul_philp  Read Replies (1) of 54805
 
Ethan,

I have been wondering, mostly to myself, if options are expensed using B-S, does it not make sense to add the amount of the expense to the employees taxable income in the year that the option is granted?

This would have many benefits. For employees, it would mean that gains from options down the road would be taxed as capital gains and not employment income. A substantial difference if your options pay out. For existing shareholders, the tax liability could serve as something at risk, although not completely aligning the upside and downside risks, it would be an improvement. It could also serve as a contol on executive option plans since the executive would have a tax liability to contend with.

Just a thought,
Paul
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