Replies to post #713821 on NorthWest Biotherapeutics Inc (NWBO)

[exwannabe]

The tax ht on NSOs is when they are exercised for the difference the then current market and the exercise price. The transfer does not set a basis. We have no idea if these were exercised.

Also, most options have been exercised cashless.

EDIT: If exercised they would show up in the running share count. But if cashless only a few modest percent of them would.

[kabunushi]

It's hard to believe there would not be an immediate gift tax liability created on gifts to family. I would assume options would be valued as gifts at fair value i.e. black-scholes calculation. For 5 year calls at 35 with a current stock price that would be around .30. International tax laws are complicated. Bosch lived in Holland for a while but he is likely still a US resident if not a US citizen. His family who received the ESOs as gifts are likely to be Netherlanders. US vs Dutch estate/gift tax rules are as different as day and night. The US has a $12M deduction. Dutch estate tax has super low deductibility except for spouses.

Bosch is motivated to give when the stock is low for the lowest hit on gift/estate tax. If he had wanted his giftees to cashless exercise or exercise and sell he would never have waited till there was only a $.01 spread! At a .01 spread the giftees might be motivated to exercise and hold in one case: if they expected to hold over a year, then at the risk of .01 per share, they could exercise here for .01 to start the stock holding period to start so they can get LT holding after a year. Also wrt Dutch gift tax, if they exercise immediately maybe the gift value could be considered .01 rather than the black-scholes value, in which case .01 per share might be initial taxable income. Interaction between gift and income tax would be complicated! If they keep the options unexercised then certainly the value for gift tax purposes would likely be .30 (black-scholes value). If the gift tax liability were Dutch because they are Dutch, then it could be a whopping .30 x 1M (for each of 3 1M share gifts) or 300k times 35% or about $100k. If US gift tax only, it can be deferred into estate tax, I'm not sure about the Dutch side.

The gift/inheritance tax is very different under US vs Dutch law and I'm not an intl. tax expert. But it's impossible to believe that Bosch doesn't think that he has a chance of ending up with an estate with even US inheritance tax liability so he's motivated to make these gifts at the lowest possible stock price. In any case, cashless exercise here at .36 or cash exercise and sell would be a moron's move. You'd have to be an idiot to imagine that Bosch would have waited until the stock is at .36 to gift and advise the receiver to cashless exercise and get 1/35 of the total number of options as shares or to cash out at .01 a share. None of these shares are going to be sold into the market at a price this low. There is a small chance the options could be exercised here for the stock holding period to start asap, at the risk of $10,000 per 1M shares. Any LT holding period can only begin on stock, never on the options. We might see the share count increase by up to 3M shares but if we do, those shares are surely not going to be sold into the market.