Questions regarding stocks and taxes.

[spikerS]

Hey guys. through my work, my company has a stock buying program. for example, for every $10.00 of stock that i buy, the company will buy $4.50 in my name as well, for a total of $14.50.

now, I have already paid my taxes on the original $10.00, but as the employer contributed $4.50, i have to pay tax on the $4.50 as well as any money made from the stock price going up.

now on a hypothetical question, lets say that the 1 share has a fair market value of $14.50 when purchased, but over the course of the year it dropped to $10.00, do I still have to pay the income tax on the $4.50 per share, as I never saw the benifit of it when i cash the stocks out?

[Rat Fink]

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[LLLimit]

you have to pay half of what you sell? or half of your capital gain?

there's a difference

[spikerS]

Originally posted by Rat Fink
I beleive you only pay taxes when you sell. If you haven't sold any, then you haven't realized any material gain/loss.

ok, so for argument's sake, the cost of 1 share when bought, was $14.50, and when sold, was $10.00. since gained nothing personally, do you still pay the income tax on the $4.50?

[Rat Fink]

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[Rav4Guy]

Initially, the 4.50 will be a taxable benefit and will be need to be included in your income tax return for that year it was received.

As for for market value being lower than your cost base, you won't be able to realize that loss until you dispose of the shares on the open market, whenever that may be.

Hope that helps,