Employer is offering stock options to employee. Employee can elect to value to stock at date of receipt or date of exercise. Anyone have an experienced recommendation on which to choose?

employer stock options are tricky. You can elect to income in income now and pay the tax now or pay the tax when you exercise the option. Usually, if you think the stock value is gonna increase you declare them now and pay the tax now. If you think the value will decrease, yoiu exercise them later and pay less tax.

Its a gamble. No one has a crystal ball to predict the future value of a stock......unless you are an insider.

My client is going to make the election to include them in income now because the value is depressed. So, hopefully they dont depreciate further. Thanks for the help.

Question: are the stock options reported on a 1099 or W-2? Does the employee pay capital gains on them?

So does this advice mean he is now reporting income on the accural method as opposed to cash basis? And can you change like that from year to year?

The lure of stock options is attractive. The problem is that holding too much of a company stock is that in a volatile market could cause a large loss from over allocation of funds into one stock. I've been seeing a lot of it lately with clients holding National City, Rite Aid and Ford.

this thread is pretty well responded to, but I wanted to answer Mickey"s question as to how they are reported. Stock options are reported on w-2 as part of wages and compensation. The employee should get a cost basis statement from the employer showing what he paid for them. You must retain this information. Its the only proof of your cost. Especially if you hold on to the stock for some years.

And, many stock options restrict when the owner can sell the stock.