Tuesday, August 01, 2006

CFO.com on one impact of back dating

Gee, I ad not thought of this impact:

From CFO.com:
"Lost amid the swirl of media attention, however, is what backdating, or other practices, such as re-pricing, might mean if you happen to be one of the people who holds those options.

In much the same way that backdating is now prompting some companies to restate, corporate tinkering with options can damage the personal equivalent of a financial statement: your tax return."

Why is this a problem?

"The board's action makes the option a non-qualified stock option because the exercise price does not equal the fair market value of the stock at the date of the grant.

Non-qualified stock options require tax payment at the ordinary income rate for the difference between the grant price and the price at which the option is exercised (the gain). Non-qualified stock options do not meet the criteria to be treated as an incentive stock option, which has a tax benefit of having the options taxed at the lower capital gains tax rate."

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