BSX » Topics » Federal Tax Treatment of Options under Stock Purchase GESOP.

This excerpt taken from the BSX DEF 14A filed Apr 10, 2006.
Federal Tax Treatment of Options under Stock Purchase GESOP.   The 2006 GESOP is intended to qualify as an “employee stock purchase plan” as defined under Section 423 of the Code. Under the applicable Code provision, an employee subject to United States taxation will recognize no federal income tax upon either the grant or exercise of an option granted under the 2006 GESOP. If the employee subject to United States taxation sells or otherwise disposes of shares of common stock purchased under the 2006

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GESOP within two years after the date the applicable option was granted, or within one year after the date such option was exercised, the employee will be taxed at ordinary income rates on an amount equal to the difference between the exercise price and the fair market value of the shares of common stock at the time the option was exercised and the Company will be entitled to a deduction of an equivalent amount. The difference between the amount received on the disposition of the shares and the employee’s tax basis in the shares, as adjusted to reflect the amount taxed as ordinary income, will be recognized as a capital gain or loss.

If an employee sells or disposes of shares more than two years after the applicable option was granted, and more than one year after the option was exercised, the employee will be taxed at ordinary income rates on the amount equal to the lesser of (i) the excess of the fair market value of the shares at the time of the disposition over the exercise price or (ii) fifteen percent (15%) of the fair market value of the shares at the time the option was granted, and the Company will not be entitled to a corresponding deduction. The difference between the amount realized on the disposition of the shares and the optionee’s tax basis in the shares (as adjusted by the amount of ordinary income recognized) will be recognized as a capital gain.

The affirmative vote of the holders of a majority of the shares of the Company’s common stock present or represented at this meeting is required to adopt the 2006 GESOP.

A copy of the Boston Scientific Corporation 2006 Global Employee Stock Ownership Plan is attached to this Proxy Statement as Appendix A.

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