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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: mepci who wrote (158781)	7/24/2000 5:01:11 PM
From: GVTucker	Read Replies (1) \| Respond to of 176387

mepci, RE: Please correct me whereever I am wrong. I'll do my best, however my understanding of tax law can get a little hazy at times, so no promises. 2. Michael has an option to buy the stock at $1. He exercises it. $1 goes to shareholders. Michael gets the stock. No tax implications still. There is a tax implication. Go to the cash flow statement, and look at the line item, "Tax benefit of employee stock plans". This is where the tax books are adjusted to GAAP books for the non-cash cost of employee stock options. Just one of the many reasons why corporations rarely pay even close to the tax bill itemized on the income statement. An additional tax implication here is that MDell owes the taxes when the option is exercised, not just when the stock is sold. One final note is that I remember when one of my favorite and most successful shorts tried to take that tax benefit and call it an income statement item for book purposes. Thankfully, they were caught at this rather obvious ruse. This is big business, but shareholders are legally kept in the dark. Most all of this information is disclosed to shareholders, just not within the balance sheet or the income statement. That's why everyone should read the notes, where a lot of the questionable disclosures are made. As an added note, a lot of companies disclose much more than is legally required. Dell is not one of those companies, and they get rather nasty when pointed questions are asked about their options portfolio. Given that DELL is one of the most aggressive companies around when it comes to both options for compensation as well as options trading to fund share repurchases, this is a suspect item for Dell in particular, IMO. It wasn't much of an issue when the company was clicking on all cylinders, but with the stock price growth slowing, it looms much larger.