Declare as what? It's treated as income - you declare it, and you pay tax on it.

I meant declare as part of the cost basis.

IE, if you are paid $5000 / week and you can optionally take $1000 of that as options, and you do so, why doesn't that $1000 become part of your cost basis?

That's just one of the problems with the whole stock options tax rules. You really have to pay to play (triple taxation!), and it makes the golden handcuffs so much more more worse. You see a lot of people doing short term sales because they can't afford to hold onto the stock for a year and take the AMT hit.

Ah I see - that's not how it works currently, but I can see why one might wish it did.