ESPP -- sell now or later?

**jIM_Ohio** · 03-07-2008, 04:47 AM

I would ask the following questions (with direction of question in parantheses)

1) How much do you have invested (if $860,000, for example, the stock is 1% of portfolio)?

2) is company stock a large cap, mid cap or small cap (what is your overall asset allocation)?

3) What tax bracket are you in (will $8600 of ordinary income increase to a higher bracket)?

4) What is 52 week price range of stock (where is the price relative to that now)?

I used to work for a company that offered an ESPP. We bought at a 10% discount. The 10% discount was taxed as income on each paycheck. My opinion is that if you buy only to get the discount, and are being taxed on the discount, then selling to break even, it sounds like you are taking way too much risk for a little gain.

5) What is your net gain (after taxes, discounts and brokerage fees)?

**Hypersion** · 03-07-2008, 02:55 PM

Originally posted by zetta View Post

My husband participates in an ESPP through work. Basically they withdraw a contribution from each paycheck, then at the end of six months the plan buys the company stock for you at a 15% discount.

The tough question is whether to sell immediately, take the profit, and pay income taxes on it, or to wait one year so it is taxed at long-term capital gains rates, and take the risk that the stock may decline 15% or more in the meantime.

It's worth about $8600 right now. Today the stock is a little down, so it would only be a 12% profit.

ESPP are treated different for long vs short term capitol gains. It's usually TWO years from the strike date and one year from the grant date.

ESPP -- sell now or later?