[styrophone]

Is there a relative tax advantage to waiting to sell ESPP shares? AFAIK, an ESPP discount counts as earned income in the same year, and LTCG tax advantages would only apply to growth, which would be the case for holding any other stock over that period.

[gok]

If you sell ESPP without waiting a year, that’s a disqualifying disposition. The difference between purchase price and sale price is taxed as ordinary income. If you hold it for a year after the sale (and 2 years after the grant), that’s a qualifying disposition, and you pay the lower of the discount or the profit from the sale price as ordinary income and the rest of the gains as LTCG.

If the stock is generally not going down and your company does the typical “you pay the lower of the first and last day price of the offering period” thing (a look-back provision), holding the stock is the only way to get preferential tax treatment on that part of the benefit. Of course this isn’t a sure thing; you do risk the stock going down before you finally sell.