AMT tax article: fwd from another list

From: Strata Rose Chalup (
Date: Fri Apr 13 2001 - 12:42:48 PDT

My amazement with this article is that somebody as recently as March 2000
had 100K shares of Cisco at between 5 and 10 CENTS each. And they describe
this guy as an "engineer". WTF? Did he join way early and never ever
cash out earlier? 100K options in a mature company like Cisco sounds
like exec level compensation to me!


Los Angeles Times (04/13/01) P. A1; Weston, Liz Pulliam; Huffstutter, P.J.;
Healey, Jon

Tech workers who exercised stock options last year but did not sell them
have seen the value of their shares plummet. Still, according to tax law,
they have to pay taxes on the unrealized paper profits. Some tech employees
are being saddled with millions of dollars in taxes that they have no way
to pay. Jeffery Chou, a Cisco engineer, purchased 100,000 Cisco shares in
March 2000 for 5 cents to 10 cents apiece. At that time, Cisco was trading
above $60, meaning that Chou made an unrealized taxable profit of $1.8

Additionally, he bought the shares under an incentive option plan that
encourages people to hold on to their stocks for at least one year instead
of selling them immediately. The IRS allows employees who buy under
incentive plans to sell their stock by Dec. 31 and pay only the actual
profit, instead of the paper one. However, Chou, and many like him, missed
the deadline and never considered the situation he is until now. He says
his entire net worth still leaves him $700,000 short of his tax bill and
protracted negotiations with the IRS will leave his family in financial
limbo. For many of these workers, filing bankruptcy is not an option
because recent tax debt is exempt from Chapter 7 coverage. Their only hope
seems to be legislation pursued by Rep. Zoe Lofgren (D-Calif.), whose
constituency includes part of Silicon Valley. His bill would alleviate at
least some of the burden for those who bought stock under the incentive
options plan.

Strata Rose Chalup [KF6NBZ]                      strata "@"
VirtualNet Consulting                  
 ** Project Management & Architecture for ISP/ASP Systems Integration **

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