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ESPP selling before 2 years

Are there any scenarios where it may be better (tax-advantaged) to sell espp stocks between 1-2 years (1 year after purchase and before 2 years after the offering date)? I know most people either sell immediately, or hold on to them for 2+ years to get tax breaks, but if the market goes down over the offering period (where the offering period start price is higher than the purchase date price), is it better to sell before hitting 2 years after offering date?

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1 Reply
KrisD15
Employee Tax Expert

ESPP selling before 2 years

If I understand you correctly, you are saying that the Strike or Option Price becomes higher than the Fair Market Value of the stock on the purchase date.

If that were true, would the employee still purchase the stock? 

 

If the employee is committed to purchasing the stock at a higher price than Fair Market Value on day of purchase, the employee might sell the stock early as it would result in a short-term loss which could be used to offset a short-term gain and the Ordinary Income would be the discount on the lower Fair Market Value of the purchase date. 

 

[Edited 02/07/2024 I 12:28pm PST]

 

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