The public company I work for offers a stock purchase plan at a 15% discount. There is an annual limit to how much each employee can purchase at the discounted rate.
To keep things simple assume:
- The stock price is $100/share, so it can be purchased through the plan at $85/share.
- The stock price never changes
- The stock will always be held for at least one year (no short term cap gains)
- The max amount of stock that can be purchased annually is $5000 (based on the full price, not the discounted price)
- Does the discount amount count as income?
- What is the actual rate of return?