A.G. Kalman wrote:
- quote -

That should have said, "doesn't make" the 83(b) election.

--
Alan
http://taxtopics.net

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Arthur Kamlet wrote:
- quote -

From memory and not recent activity:

Restricted stock that generates income at vesting would be
apportioned to CA based on the time period the employee was
actively employed in CA after the date of grant. E.g.
Employee has to work for two years before the stock vests
and does make the 83(b) election. Works one year in CA and
relocates to IL for the next year. CA source income would
be 50% of the recognized compensation.

--
Alan
http://taxtopics.net

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"Arthur Kamlet" <kamlet[at]panix.com> wrote:
- quote -

No of course not, not even close. CA taxed the employee
when the stock was granted. You are confusing the sale of
an asset with the receipt of one. Exercising an option is
the same as receiving the stock. Both are completely
different than selling said stock.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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Bob V wrote:

- quote -

Employee stock options generally fall into the category of
property given in exchange for services, which is governed
by IRC Sec. 83. The source of income from personal services
is the place where the services were performed. Therefore,
if you receive property in exchange for services that were
performed in California, the value of that property is
California source income to you, even though you may be a
nonresident when you receive it.

Whether you have California source income arising from these
options depends on the type of option and the circumstances
under which you exercise them.

There are two kinds of employee options, nonqualified (NQ)
options and qualified Incentive Stock Options, or ISOs.
Your employer's advice sounds as if your options were NQs.
When you exercise them, you have ordinary income to the
extent of the bargain element, i.e., the difference between
your exercise price and the fair market value of the stock
at the date of exercise. That income will be reported to
you on a W-2. Assuming that you performed all of the
services for which you earned the options in California, it
is California source income and is subject to California
income tax. The employer must withhold California tax and
you must file a nonresident California return in the year of
exercise. Idaho will allow you credit for the tax you pay
to California on that income, limited to the proportion of
your Idaho tax liability that relates to that income.

If you sell the stock immediately upon exercise, it's all
over and you have no capital gain or loss. If you hold the
stock for some period of time and then sell it, your basis
is the FMV of the stock at the date you exercised the
option. Any gain or loss on the sale of the stock is income
from an intangible (the stock itself) and has its source at
your residence at the time of the sale. Therefore, any such
gain or loss would be Idaho source income and not subject to
California tax.

If your options were ISOs, you would have no ordinary income
at exercise (except for AMT purposes). If you hold the
stock for the required period after exercise and then sell
it, for regular income tax purposes you have gain or loss to
the extent of the difference between the sale price and the
price at which you exercised the options. For California
purposes, that entire amount is considered capital gain or
loss from an intangible and there is no California source
income arising from the sale of the stock. However, if you
sold the stock in a "disqualifying disposition," the
treatment would be the same as for a NQ option.

My guess is that yours are NQ options and that you will be
subject to California tax on the bargain element at the time
of exercise.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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David Woods, EA, ChFC, CLU <dwoods[at]woods-financial.com> wrote:
- quote -

Interesting.

So if in the same situation, the company grants an employee
some stock intead of options, restricted (company keeps
track of sale) or unrestricted stock, and later when I haved
move from CA I sell it, is this gain CA source income?

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Bob V wrote:

- quote -

Assuming we are dealing with nonqualified stock options
granted to you when you were employed in California, the
exercise of the stock option is treated as compensation for
services earned in CA and taxable by CA. This has been the
case for at least 40 years. ISO treatment depends on whether
one has a qualifying or disqualifying disposition. In
addition, there are AMT adjustments to deal with.

This is all explained in CA FTB Pub 1004.
http://www.ftb.ca.gov/forms/misc/1004.pdf

--
Alan
http://taxtopics.net

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"Bob V" <transition[at]yahoo.com> wrote:

- quote -

No opinions, only long standing precedent that the efforts
which give rise to any gain on the option exercise occurred
in CA.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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Retired from a company two years ago when I lived in
California. I now reside in Idaho. When I was employed by
the company I was given stock options that need to be
exercised over the next few years.

Company is now telling me that upon exercise they have to
withhold Calif taxes (approx 9%), instead of Idaho (approx
6%), because I was a resident of Calif when the options were
issued.

This doesn't seem correct to me. Why is Calif due any tax
when the options are virtually worthless until and unless I
exercise them, and I haven't lived in Calif in over 2 years.

Opinions anyone?

TIA,
Bob

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