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Tax Withholding on Equity Compensation
Published on 2012-05-22 09:16:57
Withholding is required when an employee has compensation income from exercising a non-qualified stock option or from a restricted stock grant. However, there is no tax withholding from the exercise of incentive stock options (ISO’s) or employee stock purchase plans (ESPP’s). Read more... > read more
ISO Tax Strategies, Part 5: Five Part ISO Series
Published on 2012-05-15 07:12:41
Part 5: Five Part ISO Series During my preparations writing this ISO series, I gathered these final points to finish up with a couple of strategies on exercising ISO’s: 1. The first strategy is to exercise your ISO option up to the AMT buffer amount. Read more... > read more
The Effects of AMT on Exercising ISO’s, Part 4: Five Part ISO Series
Published on 2012-05-08 12:31:53
Part 4: 5 part ISO Series: As I discussed in last week’s blog, the option holder can either have a qualifying disposition if he plans to hold the shares and take advantage of the special tax rate or he can sell the shares before the end of the year, if the stock goes down in [...] > read more
Tax Treatment of ISO’s, Part 3: Five Part ISO Series
Published on 2012-05-01 07:42:23
This is Part Three of a Five Part ISO Series: As indicated in Part 1 of the Series, in order to qualify for special tax treatment the option holder has to satisfy the special holding period for a qualifying disposition. No disposition occurs within two years from the grant date and no disposition occurs within one year after the shares are exercised. Importantly, both requirements must be satisfied for it to be a qualifying sale. Read more... > read more
Qualifications for an Option to be an ISO, Part 2: Five Part ISO Series
Published on 2012-04-24 10:19:24
Sometimes it is not always clear whether the option is a non qualified option or an ISO. For an option to qualify as an ISO it must meet four requirements: read more.... > read more
Overview of Incentive Stock Options (ISO’s), Part 1: 5 Part ISO Series
Published on 2012-04-17 16:58:32
This is Part 1 of 5 in a Five Part ISO Series Definition: Incentive Stock Options (ISO’s) are options that meet certain requirements that are eligible for favorable tax benefits. The main benefit is the ability to convert the bargain element (gain) from regular income to long-term capital gain. In order to take advantage of this tax benefit, the option holder is required to hold the shares after exercise for a specific period of time, exposing them to additional concentration risk. Read mo [..] > read more
Preparing the 83b Election, Part 4: Four Part Series
Published on 2012-04-10 10:54:18
Rounding out our Four Part Series on 83b Elections -- let's explore the preparation of the 83b Election... As mentioned in my previous blog, the most important thing in making the 83b election is that it must be done within 30 days after the transfer of the shares. The 30 day period is simply 30 calendar days including weekends and holidays. There is no specific IRS form required when making the election. Question: How does the executive make the election? Read more.... > read more
The Risks of filing the 83b Election, Part 3: Four Part Series
Published on 2012-04-03 06:07:16
This, our 3rd Part in a 4 Part Series on 83b Election risks: As explained earlier, the 83b Election works great if the shares appreciate from the time the election is filed until the shares vest. So what are the risks of filing the 83b election? Read more... > read more
Reasons to make the 83b Election, Part 2: Four Part Series
Published on 2012-03-26 19:27:09
In this second edition of my Four Part Series on the 83b Election, I delve into the driving factors that make the 83b Election a good choice for the executive. As mentioned in Part 1, the executive has 30 days from the date of transfer to make an 83b Election. Once the election is made, they are treated as receiving the shares at the time of transfer even though they are still subject to a vesting schedule. You might ask yourself, why would an executive do this? Read more..... > read more
The 83b Election Explained, Part 1: Four Part Series
Published on 2012-03-21 17:11:50
This is the first of a 4 part series: When a company issues Restricted Stock, there is usually a vesting schedule attached to those shares. Shares are considered vested when the executive no longer has to provide additional services to the company to avoid losing some or all of the value of the shares. If the shares are not vested when they are received, there is no tax implication until the vesting date. Read more... > read more
Consequences of Stock Grants without Restriction
Published on 2012-03-06 22:32:07
Generally, when a company issues stock grants there are certain restrictions that are placed on the shares. This usually is in the form of some type of vesting schedule where the executive will lose some or all of the value of the shares unless they continue working for the company through the vesting time period. > read more
Taxation of Employee Stock Purchase Plans (ESPP)
Published on 2012-02-24 14:58:03
Under most ESPPs, an employee that participates in the plan makes their purchases of company stock through payroll deductions. All of the purchases are made with after tax dollars. As mentioned last week, if the plan is a qualified 423 Plan ESPP, the employee can receive special tax treatment on the purchased shares. > read more
Overview of Employee Stock Purchase Plans (ESPPs)
Published on 2012-02-17 15:03:02
An ESPP is a program that allows the employees of a company to buy stock in that company. Usually the employees purchase the stock through a payroll deduction. ESPPs can be either qualified or non-qualified. A qualified ESPP is designed to receive special tax treatment in section 423 of the Internal Revenue Code. They are sometimes referred to as 423 Plans. If a company offers a non-qualified ESPP plan it is usually to avoid some of the restrictions placed on the qualified (423) plan. > read more
The Uniqueness of Stock Options
Published on 2012-02-07 15:19:06
The Uniqueness of Stock Options Unlike any other type of investment, Stock Options have three unique characteristics that set them apart from the crowd. read more..... > read more
Concentration Risk Explained
Published on 2012-01-31 09:33:37
Did you know......."Executives of public companies represent the largest segment of share holders with concentrated stock." By our definition, any one position that represents more than 20% of a portfolio is considered a concentrated position. Why is this? > read more
Understanding the Value of Stock Options
Published on 2012-01-23 23:42:52
Simply stated, there are two components that make up the value of a stock option. In order to better understand the value of stock options we need to become familiar with these two components referred to as the intrinsic value and the time value. Breaking it down to the next level, we define the intrinsic value as the difference between the current stock price and the exercise price. For example... > read more
Tax Implications of the Five Types of Equity Compensation, Part 5: Taxation of Incentive Stock Options – (ISO’s)
Published on 2012-01-19 17:00:47
Taxation of Incentive Stock Options – ISO’s In this, my fifth and final submission to the blog series on the taxation of different equity awards, we examine the "Taxation of Incentive Stock Options" or ISO's, the benefits and tax implications. > read more
Tax Implications of the Five Types of Equity Compensation, Part 4: Non-qualified Stock Options (NQO’s)
Published on 2012-01-04 12:33:08
Nonqualified Stock Options As the series continues, Part 4: Non-qualified Stock Options are explored as we compare similarities, differences, tax implications, and timing for exercising options. > read more
Tax Implications of the Five Types of Equity Compensation, Part 3: Stock Appreciation Rights (SARs)
Published on 2011-12-23 11:49:37
What are Stock Appreciation Rights: Stock Appreciation Rights (SAR's) provide the executive with the right to receive cash in the amount of increase in value of a specified number of shares. The following are some common questions and answers about SAR's that should help define and differentiate them. > read more
Tax Implications of the Five Types of Equity Compensation, Part 2: Restricted Stock Units
Published on 2011-12-15 14:04:03
In my previous blog, Part One of the series, we discussed Restricted Stock Grants, and the tax implications involved. Part Two consists of defining the second type of equity compensation; Restricted Stock Units (RSU's), and important components including forfeiture, tax consequences, timing and more. > read more
Tax Implications of the Five Types of Equity Compensation, Part 1: Restricted Stock Grants
Published on 2011-12-05 23:54:31
This is the first entry in a five-part blog series on the tax implications of the five types of equity compensation. Throughout the the series, we will discuss the tax implications of each of the five types of equity compensation, as described in the my previous blog published 11/29/2011 ("Five Types of Equity Awards"). > read more
Five Types of Equity Awards
Published on 2011-11-29 20:21:32
Knowing the different types of equity awards that corporations issue and what the executive owns is important. Read more.... > read more
Early Year Exercise of ISO Strategy
Published on 2011-02-01 11:21:10
As I had indicated in my November 2010 blog, it is normally preferable to exercise ISO shares early in the year to start the one-year holding period to qualify for the long-term capital gain rate. This blog will explain the reason behind the early ex > read more
Follow up Tax Bomb from Exercising NQSO’s
Published on 2010-12-21 13:26:43
As a follow-up to my last blog about the large tax implications from exercising nonqualified stock options (NQSOs), let’s look at converting the bargain element of incentive stock options (ISOs) into long-term capital gains. Except in rare situatio > read more
Tax Bomb from Exercising NQSO’s
Published on 2010-11-30 10:32:54
I recently met with a client who had stock options in Praxair (PX). He called because the options were nearing expiration, and these were the only options he had received from the company. He wasn’t familiar with how options work, so I explained > read more
Determining How Many ISO Shares to Exercise with AMT Buffer
Published on 2010-11-08 15:36:49
In my last blog, I discussed how the “AMT Buffer” can allow the executive to exercise incentive stock options (ISOs) without incurring any regular income tax or alternative minimum tax. In this blog, I will show how to determine the number of ISO > read more
Year-End Planning with Incentive Stock Options (ISOs)
Published on 2010-10-14 15:43:11
Generally, it is preferable to exercise ISOs early in the year to start the one-year holding period to qualify those shares for the long-term capital gain rate. However, with the S&P up over 10% in the third quarter, it may be time to revisit ISO > read more
Year-End Planning with Incentive Stock Options (ISOs)
Published on 2010-10-14 15:43:11
Generally, it is preferable to exercise ISOs early in the year to start the one-year holding period to qualify those shares for the long-term capital gain rate. However, with the S&P up over 10% in the third quarter, it may be time to revisit ISO > read more
Costs of Exercising Options
Published on 2010-10-04 11:04:08
An executive who makes the decision to exercise stock options should be clear about the expenses associated with the transaction. Here are the three types of expenses to consider. The first cost is simply the exercise price of the option. For example > read more
Costs of Exercising Options
Published on 2010-10-04 11:04:08
An executive who makes the decision to exercise stock options should be clear about the expenses associated with the transaction. Here are the three types of expenses to consider. The first cost is simply the exercise price of the option. For example > read more
Shedding light on the Black-Scholes Formula
Published on 2010-09-20 12:45:31
In evaluating employee stock options, the Black-Scholes formula is the most widely used method. It calculates the total value of an option, which includes both intrinsic value and time value. Intrinsic value is simply the difference between the exerc > read more
Cashless Exercise vs. Exercise and Hold Stock
Published on 2010-09-10 10:59:42
Often I am and asked, is it better to cash in my options at the time they are exercised (a cashless exercise) or to exercise and hold the stock? To arrive at an answer, we first need to know whether the options are non-qualified or Incentive Stock > read more
Cashless Exercise vs. Exercise and Hold Stock
Published on 2010-09-10 10:59:42
Often I am and asked, is it better to cash in my options at the time they are exercised (a cashless exercise) or to exercise and hold the stock? To arrive at an answer, we first need to know whether the options are non-qualified or Incentive Stock > read more
Leverage with Stock Options
Published on 2010-08-16 13:46:12
Leverage is generally associated with some sort of debt against an asset: when the asset goes up in value, the investor is able to magnify their return, but when the investment goes down, it can obviously magnify the loss as well. Executives of com > read more
Leverage with Stock Options
Published on 2010-08-16 13:46:12
Leverage is generally associated with some sort of debt against an asset: when the asset goes up in value, the investor is able to magnify their return, but when the investment goes down, it can obviously magnify the loss as well. Executives of com > read more
Understanding Stock Appreciation Rights
Published on 2010-07-16 15:14:13
Stock Appreciation Rights (SARs) provide the holder with the right to receive cash compensation in an amount equal to the increase in value of a specified number of shares of stock. Although you may be thinking SARs sound like stock options, the di > read more
Understanding Stock Appreciation Rights
Published on 2010-07-16 15:14:13
Stock Appreciation Rights (SARs) provide the holder with the right to receive cash compensation in an amount equal to the increase in value of a specified number of shares of stock. Although you may be thinking SARs sound like stock options, the di > read more