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The opportunity to use this money is lost when tied up in securities. Can you get a better return on it elsewhere or is it ok where it is? (Personally my ESPP is paying better dividends than ING so I don't mind saving money in my ESPP.)
In that case, how do buying these shares fit into your financial plan? If you don't want to keep them, should you really be buying them in the first place? It sounds like you're already overweighted to your company's shares based on your 401K investments...
First, if my total company stock, both ESPP and 401(k), was more than a fraction of my assets (maybe 5%), I would sell some to bring it down to that level. Or depending on how often the ESPP purchases are and how frequent the trading windows happen, I might sell a little more such that my exposure would never go much above the target e.g. 5%.
As to which shares I would sell I would either sell complete lots to make future tax tracking easier; and/or I would sell any that were held long enough to be long-term gains; and/or I would sell enough winners and losers to balance each other out plus $3,000 more losses.
Other than that, I would hold on to them for the 2 year period and then sell them as soon as possible after that. I would also sell any shares in my 401(k) if and as soon as possible, since there's no tax implications of doing so. (Other than losing the special tax treatment of employer stock in a 401(k), but to me said special treatment is not worth the risk.)
Plus, since you have income coming in from different sources, you're not putting all your eggs into one basket like many other people investing in employee stock are doing.
If you want to get rid of the stock, set up a plan to get rid of it after it reaches it long-term capital gain. Almost like reverse DCA. Just make sure to keep it simple for tax purposes.
First: Do you need the money now? Do you have debts to pay or big purchase item you will need money soon for? Do you have a full cash reserve in case of emergency? If you need or could really use the cash for something then go ahead and sell the stock instead of gambling it will go up further.
Second: If you don't need the money right away then I'd base my decision on my expectations of what the company's stock is likely to do. If the company is very strong financially and its stock is much lower than it would be normally then I'd probably conclude theres a decent chance it will recover further and I'd hang on to it. But if the company in question is on shaky ground and its stock has not gone up much and they are losing money then I wouldn't see much reason to assume the price will go up much and I'd sell it.
I'm in the same situation with my company ESPP. I'm holding on to the stock since I don't need the money at the moment and I have a strong reason to belive the stock will go up further in the next year or two.
NOT 2!
I would read up on ESPP plans.
Basically you do not want to sell any stock within the 2 years if you are taking a loss on it, selling it for less than the FMV on the offer date (not what you purchased it for). Or if your plan has a look back and the stock significantly increased in price over the offer period.
In the rest of the situations where you have a gain, its unlikely to make a difference in the taxes you pay. Any stock held longer than 1 year is still a long term capital gain.
Even after the 2 years you will also still have to report the discount as income on your 1040.
http://www.fairmark.com/execcomp/espp/disqual.htm
But I have an uncle who went through a situation like Jeep(#13), so I see that side of it as well.
If this is a concern perhaps you should stop participating in the plan at the maximum level.
Generally not a good idea to have too mch money in one stock (especially if it is the company you work for - if it gets into difficulties you could end up losing your job and your investment at the same time). I'd suggest setting a maximum exposure (somehwere between 5% and 10% of net worth and selling anything in excess of that when each window comes up. If there is a tax driven reason for deferring the sale, by all means delay if you are comfortable with the investment. but recognise that you are increasing your risk by doing so.
If it was me, I'd set my ceiling at 10% of net worth and sell anything above that at each availble window (starting with the losing positions) and keep buying to take advantage of the discount. Tax considerations would be secondary to risk management.
Everyone who held the old stock lost it all, and was never given any consideration for our losses.
I am not even allowed to show it as a loss on my taxes? I lost a LOT of money, but I know some who lost much more than I. What can I say? be careful?
That ESPP sounds nice! The company I worked for had a similar one (get it at a discount no matter what), but was then bought by a larger company whose plan includes them offering the stock at a certain price, then after 3 years of holding, they match one share for every 3 you own. Currently I'm way in the green on this deal because by happenstance the company picked pretty close to a 52 week low to offer the stock. I digress though. Good luck
Fairmark has an example:
http://www.fairmark.com/execcomp/espp/dispositi...
Example: You decide to contribute $10,000 during an offering period and that turns out to be a good choice: the stock price rises dramatically, and because of a lookback provision you're able to buy $25,000 worth of stock, giving you a $15,000 benefit. You hold onto the stock and the price falls just as dramatically, leaving you with shares worth just $8,000.
In this situation, a disqualifying sale will require you to report $15,000 of compensation income. You'll also have a $17,000 capital loss on the sale, but because of the capital loss limitation you can deduct only $3,000. Overall, you have an out-of-pocket loss of $2,000 but you had to pay tax on $12,000 of phantom income ($15,000 of compensation income minus $3,000 of capital loss). By contrast, if you hold the shares long enough to avoid a disqualifying disposition, you would report no compensation income in this situation, just a capital loss of $2,000.
Ten percent of my income going to our ESPP program. That's the max, but I wish I could make it 50% or even higher! Luckily, my company's stock has skyrocketed, even in this down economy. It's up on the order of 1000%'s of percentage points since I joined the company and I still have plenty of shares priced in the single digits, to someday sell. The trip vacation I am currently on and the Ferrari in my garage are all a result of me simply signing up for ESPP, as early as possible. It was one of the best decisions I ever made in my life.
Good luck with your decision. Don't worry, things will improve!