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Date:   Wed, 09 Jun 1999
From:   Shauna

Hi Michael,

I met with you the other day and have a follow up question.

My company is on the verge of going public (this month). They are now offering a new ESPP program and I want to know if I purchase shares on the ESPP program, a) can I transfer them to friends and family and b) if I can do this, what will be my tax consequence?

If you don't know if I can transfer them, is this common to allow this or would it be rare?

Your quick response is most appreciated. Thank you and I'll send in my 1998 taxes soon so we'll be prepared for 1999. I exercised about 15000 ISO - so I'll definitely need some help come tax time. :)

Answer

Date:   Fri, 11 Jun 1999

Hello Shauna,

The holding period requirements for shares received from an employee stock purchase plan are similar to those for shares received from exercising an Incentive Stock Option.

If the shares aren't held more than two years after grant and one year after purchase, you report ordinary income for the spread between the fair market value of the stock and the purchase price.

So, don't transfer the shares to friends and family until you meet the holding period requirements.

I'm looking forward to continuing to help you with tax planning and preparation relating to employee stock benefits.

I hope to hear from you soon!

Mike Gray

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IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.