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1. If the option is to buy at \0 percent of market value—say, he right to buy at $95 a share stock selling on the New York Stock Exchange at $100._t h e optionholder has received income of $5 a share as soon as he buys at $95, but there is no income tax due on this. If he later sells die stock, he will pay tax at the lower capital gaines rates.
2. If the option is to buy at $90 stock selling for $100 on the open market, the rule is somewhat different. Again, there is no income tax payable at the time the option is exercised, but tax is payable at regular rates when the tax is disposed of by the holder.
In example No. 1, it can be seen that an executive able to buy a substantial number of shares of a desirable stock at a 5% discount can realize an appreciable immediate income not subject to die income tax, represented by the 5 per cent spread. If he holds die stock until death, and it passes to his widow, no income taX is payable by jfim at any time on that 5 percent bonus.
Leaving aside any discussion of the claimed justifications for this peculiar tax arrangement, we can Continued on page six
PITTS?
PARK THEATRE
FRONT ROYAL
EREE PARKING IN REAR
OF THEATRE THUBS. FRL SATURDAY^
DEC. 17 - 18 - 19 ;
PLUS FOUR CARTOONS
SUN. MON. DEC. 20 - 21 2 SHOWS SUNDAY 3 A 8p.m.
61.4%