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The Equity Compensation Planning Dilemma For Corporate Executives This is premium content

Geoffrey M. Zimmerman, CFP®
Podcast included! Executives, as corporate insiders, must perform a delicate balancing act to meet the needs, demands, and perceptions of the various constituencies interested in their company's stock. This article looks at these concerns and explores ways to manage them that can improve the chances of achieving financial goals.

International Equity Awards And Company Stock: The Confusing World Of IRS Reporting For Overseas Assets And Income This is premium content

Richard Friedman
UPDATES! For US taxpayers with overseas assets and/or income, the reporting rules are complicated, and mistakes can lead to costly penalties. This article summarizes some of the most important reporting rules.

Strategies For Hedging Concentrated Stock Positions (Part 1) This is premium content

Robert Gordon and Charlotte Lyman
Podcast included! Your company stock represents a large, concentrated portion of your wealth, making you nervous. You want to protect your gains and get your hands on some money.

Tax Planning For Options, Restricted Stock, And ESPPs After Recent Tax Law Changes: High-Income Taxpayers Impacted Most (Part 1) This is premium content

Tom Davison and William Whitaker
Notable shifts in tax rates have occurred for people with high incomes. Part 1 surveys these important tax changes and considers their impact on planning.

A Least-Regret Analysis For Equity Compensation: Maximizing Value While Minimizing Risk This is premium content

William Baldwin
Podcast included! For some employees, the value of their equity compensation plans represents their largest investment. With so much at stake, making the right decisions is critical. Intelligent planning can maximize value while minimizing risk.

Taking An Overseas Assignment: Stock Compensation For Internationally Mobile Employees (Part 1) This is premium content

Mark Miller
Podcast included! Taxation for internationally mobile employees can be extremely complex. Part 1 introduces the key cross-border topics you must know about equity compensation, including the sourcing and apportioning of income.

Taking An Overseas Assignment: Stock Compensation For Internationally Mobile Employees (Part 2) This is premium content

Mark Miller
Podcast included! Taxation for internationally mobile employees can be extremely complex. Part 2 looks at specific scenarios, withholding taxes, and tax equalization.

Compliance Concerns That Executives Must Understand To Prevent SEC, IRS, And Corporate Problems (Part 2) This is premium content

Richard Friedman
All publicly traded companies face the risk that an executive or employee may violate corporate, tax, or securities law. This article series outlines practices for executives to help them avoid compliance problems, and explains the possible penalties of noncompliance. Part 2 presents issues involving foreign financial interests, nonresident state tax returns, retirement plan funding, company rules, and more.

The Alternative Minimum Tax Sweet Spot: Planning Opportunities This is premium content

Tom Davison and William Whitaker
"My income is around half a million dollars, and I'm paying the alternative minimum tax. It's annoying, and I feel trapped. Now what?" Surprisingly, the best move may be to increase income, and pay even more alternative minimum tax! Find out why by reading this intriguing article.

Tax Strategies With Stock Options, Restricted Stock, And Deferred Compensation This is premium content

Andy Wagner
Having both nonqualified stock options and nonqualified deferred compensation gives you a tremendous amount of flexibility to optimize your financial planning and tax situation. In this article, I explain how I have used the two plans in concert with one another.

Foreign Executives Transferring To The United States: Tax-Planning Strategies For Equity Compensation This is premium content

Michael Melbinger
Some significant tax and estate-planning opportunities—and traps—exist for foreign executives who come to the United States to work (and when they leave too). This article outlines the principal areas of concern.

Hedging Your Employee Stock Options (Part 3) This is premium content

Robert Gordon
Podcast included! A regulatory change in 2009 by the SEC now lets unexercised employee options act as collateral for listed publicly traded options. Learn about the rules, possibilities, and limits of this technique.

Options For Your Options: Generating Income From Your Vested Employee Stock Options Without Exercising This is premium content

Chris Murphy
If the majority of your net worth lies in unexercised stock options or company stock, it may make sense to sell a portion to reduce the concentration risk while holding on to a portion to participate in future appreciation. However, if most financial goals can be reached without these proceeds and your position is not heavily concentrated, other strategies are worth exploring. One that is gaining popularity is writing call options on vested ESOs to generate some income.

Hedging Your Employee Stock Options (Part 1) This is premium content

Robert Gordon
Podcast included! Understand the key issues and limits of hedging NQSOs, including company, SEC, and tax law constraints. Then you can analyze potential hedging strategies for your stock options, such as collars.

Hedging Your Employee Stock Options (Part 2) This is premium content

Robert Gordon and Charlotte Lyman
Podcast included! Market volatility has made many high-net-worth executives want to hedge their exposure to concentrated positions in company stock. Unfortunately, most of the tools for hedging are not very efficient with NQSOs. Part 2 in this series examines alternative approaches.

Strategies For Hedging Concentrated Stock Positions (Part 2) This is premium content

Robert Gordon and Charlotte Lyman
Podcast included! After understanding hedging basics, you need to answer a few questions and decide whether your goals go beyond risk reduction to liquidity creation.

Strategies For Hedging Concentrated Stock Positions (Part 3) This is premium content

Robert Gordon and Charlotte Lyman
Podcast included! After learning the basic rules and restrictions, you now need to decide on the appropriate hedging tool and understand variable forwards and the final issues to consider in crafting your hedging strategy.

Converting Your Stock Option Spread Into Nonqualified Deferred Compensation This is premium content

Carol Cantrell
UPDATED! You may have employee stock options with a large spread but don't need the money, and you may want to defer the tax upon exercise as long as possible. But you also want to minimize your risk of owning a single stock. Learn about the possibility of substituting a nonqualified deferred compensation plan for your unexercised options.

Hedging Your ISO Stock This is premium content

Robert Gordon and Charlotte Lyman
Podcast included! Hedging stock from exercises of incentive stock options (ISOs) is complex, but it is possible in certain situations. Financial engineering can create a floor under the ISO stock while letting the capital gains holding period continue.

Techniques To Defer Or Reduce Taxes On The Sale Of Your Company's Shares (Part 1): QSB Stock This is premium content Editorial Staff & Contributors
UPDATES! Finding legal techniques to minimize taxes is almost as popular in the US as stock compensation. These sophisticated techniques with founder's stock and options can defer or reduce taxes.

Techniques To Defer Or Reduce Taxes On The Sale Of Your Company's Shares (Part 2): SSBICs This is premium content Editorial Staff & Contributors
UPDATES! You want to defer gain on the sale of publicly traded securities, but they do not qualify as qualified small business (QSB) stock. Here's another way to defer tax on those holdings.

How Tax Rate Changes Impact Your Stock Grant Strategies (Part 1): Nonqualified Stock Options This is premium content

Stanley Trotta with Robert Gordon
With tax increases in mind, now may be a good time to re-evaluate your current financial-planning strategy for equity compensation and company stock holdings to determine whether action is required. Part 1 looks at nonqualified stock options.

For The Highest-Paid CEOs, The Party Goes On

The New York Times
This interactive article presents the compensation and wealth accumulation of CEOs at many large companies. The figures, including the value of stock and options awards, are calculated from companies' proxy statements.

A Hidden Bull-Market Scandal Comes To Light

Geoffrey Colvin
Next time you encounter a too-good-to-be-true strategy related to your company stock that greatly reduces taxes and puts money in your pocket, consider this tale of how the IRS caught up with many too-clever executives and charged them for tax evasion.

IRS Guide To Auditing Techniques For Stock-Based Compensation

Internal Revenue Service
The IRS tips its hand on what its agents look for in audits related to all types of stock pay to ensure compliance, whether by corporations or executives.

IRS Nonqualified Deferred Compensation Audit Techniques Guide

Internal Revenue Service
Revised in June 2015, this IRS manual summarizes the taxation of nonqualified deferred compensation, which can include certain types of equity awards, and identifies hot spots for IRS review. For more about nonqualified deferred compensation, see our sibling website

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2016 UPDATES! Are there guidelines for calculating AMT trigger points? For example, if my spouse and I earn $200,000 per year, will we trigger the AMT when I exercise ISOs? This is premium content

People who live in high-tax states and itemize tax deductions, or who have significant personal exemptions, can easily owe more in AMT than in regular taxes, particularly if they exercise and hold ISOs with a big spread. The figures in the table below estimate the tipping point...

What is a concentrated stock position, and what can I do to protect myself and get cash for other purposes? This is premium content

A concentrated stock position occurs when a significant chunk of your net worth is tied up in a single stock. Strategies for hedging, diversification, and liquidity include...

UPDATES! Can my company set ownership guidelines for company stock? Any survey data about their use? This is premium content

Stock ownership guidelines specify how much company stock you must own in total or as a multiple of salary. Most companies count in the calculation the...

UPDATES! Has the likelihood of a tax audit increased? This is premium content

Yes, substantially. In addition, fluctuations of income, which can be caused by stock compensation, are a red flag that can trigger an audit. According to research...

UPDATES! If my company requires me to have a foreign bank or brokerage account because of the stock plan, what do I need to know about the FBAR and FATCA reporting rules? This is premium content

Under the FBAR and FATCA rules, you may have special IRS reporting requirements if you hold assets in a bank outside the US. This FAQ explains the requirements and the severe penalties that the IRS imposes for noncompliance...

I work and live in the United States but have non-immigrant alien status (L1 visa). My stock options vested when I worked in my home country. I plan to exercise the options while living in the US. Will I have to pay taxes to the IRS and/or the US state where I live? This is premium content

If you are a US resident at the time of exercise, the options are taxable in the United States, so you will owe federal tax on...

What is backup withholding? How do I prevent it or recover it? This is premium content

Backup withholding is a form of tax withholding on income from stock sales, along with interest income, dividends, or other types of payments that are reported on Form 1099. Your brokerage firm is required to make backup withholding if you are...

How does a non-US resident reclaim US backup withholding? This is premium content

If you are a nonresident alien and do not complete and file Form W-8BEN with the IRS upon receiving stock-sale proceeds, such as those stemming from equity awards, your brokerage firm will assess backup withholding on the proceeds. To reclaim backup withholding, take the following steps...

UPDATES! Can my company require me to retain a certain amount of company stock from a stock option exercise or a restricted stock grant? This is premium content

Although stock ownership guidelines are more common, retention mandates and requirements for CEOs and senior executives have become popular, as shown by survey data and corporate proxy statement disclosures. Supporters of share retention rules believe they show...

UPDATES! Do companies grant stock options or restricted stock to directors? Any survey data on director grants? This is premium content

Stock options and restricted stock can be granted to the directors on a company's board. Surveys by research and consulting firms show corporate trends in director stock compensation...

What does it mean when someone says that employee stock options have both face (or intrinsic) value and time value? How do these concepts apply to financial planning? This is premium content

The value of an option consists of two elements: time premium and intrinsic value. Intrinsic value is the difference...

When I take an international assignment, will taxes on my stock compensation be equalized? This is premium content

At some companies, international assignments are often accompanied by what is commonly called an equalization package. To give you an incentive to accept the international assignment, the company agrees to...

What are margin loans? Can company stock be used as collateral? This is premium content

Brokers are allowed by Regulation T of the Federal Reserve to lend up to 50% of a stock's market price on the day of the loan...

What is a Rule 10b5-1 trading plan?

SEC Rule 10b5-1 provides a defense against charges of insider trading if you later trade stock while you know confidential, important information about your company. A Rule 10b5-1 trading plan is a program for the preset purchase and/or sale of your stock that meets the requirements of this SEC rule, including the need to...

Can I put NQSOs or company stock into a charitable remainder trust or a grantor-retained annuity trust? This is premium content

Your estate-planning opportunities are more effective with company stock than with options. As a general rule, the contribution of the stock options themselves to a CRT is rather...

Can stock options and restricted stock be transferred or gifted to people or charities after I get them? This is premium content

Most stock plans do not permit this for stock options or restricted stock during your life (i.e. transferable only at death), or they allow it only...

UPDATES! How does a clawback work to take away gains from my equity compensation?

A clawback provision can appear in your employment agreement, stock grant agreement, or stock plan. If it is triggered, you must surrender to the company...

UPDATES! How common are clawback provisions? Any survey data about their use? This is premium content

Clawback forfeiture provisions usually do not appear in stock plans. Typically, they are included in stock grant agreements, which tend to be not publicly available. This makes data on clawbacks hard to find. However, a survey...

What is the tax impact of having a clawback in my grant? What if my company claws back the gains? This is premium content

The tax treatment that applies when you have a clawback provision or when a clawback is enforced is an evolving area that is gradually being clarified...

Are public resources available for doing research on a company's stock compensation practices, the grants it is making, and the holdings of its executives? This is premium content

One resource is the SEC's website. There you can search on the SEC's EDGAR system for the filings discussed below. Another resource is the...

UPDATES! Are my stock grants affected by the rules of deferred compensation under IRC Section 409A? This is premium content

A number of tax law provisions that may affect your stock grants were introduced in the American Jobs Creation Act (AJCA); the final regulations on deferred compensation under IRC Section 409A, which adopt the...

Can I use my vested employee stock options as collateral for selling call options on my company stock? This is premium content

It has become easier to sell call options on your vested employee stock options. This creates both an income-producing opportunity and a hedging strategy, if you are allowed to do this and you understand the risks...

What is restricted stock? Does it differ from restricted securities?

Don't confuse restricted securities and restricted stock. They are very different...

I want to set up a program with my company and broker in which I automatically exercise options and sell stock to pay a regularly expected bill as it's received, such as my child's tuition. Can this prearranged selling plan violate insider trading laws and my company's blackout rules? This is premium content

SEC Rule 10b5-1 now provides an affirmative defense...

Are senior executives and directors banned from trading company stock during a 401(k) blackout period? This is premium content

During any 401(k) blackout period, directors and executive officers...

Can I sell my company stock through a blind trust, or another type of trust, as a defense against insider trading? This is premium content

Using a blind trust goes beyond the protections of Rule 10b5-1 plans, yet has more restrictions. These are irrevocable grantor trusts with...

If I enter into a hedging transaction in my company stock, as a senior executive do I need to report this to the SEC on Form 4? Can I be banned from hedging? This is premium content

The SEC's Division of Enforcement has been investigating executives' reporting of certain derivative securities transactions. When you enter into a hedging type of transaction, such as collars or prepaid variable forward contracts, you need to...

If I hedge my company stock (for example, by selling calls on it), will the dividends get the favorable tax rate for qualified dividends? This is premium content

This depends on the approach you take. For most taxpayers, qualified dividends are taxed at a top rate of...

Is writing call options on, or buying put options for, my ISO stock a disqualifying disposition? This is premium content

The put options you buy give you the right to sell the stock at a price you choose. With call options you are selling the right to someone else to "call away" the stock you own. The IRS ruled that the...

UPDATES! Will my company be able to take a tax deduction for the value of my restricted stock, restricted stock units, performance shares, or stock options if my compensation already exceeds $1 million? This is premium content

This depends on what triggers vesting. Section 162(m) of the tax code limits your company's deduction to $1 million unless a senior officer's compensation over this amount meets the performance-based exception. Stock grants are structured to meet this by...

What is a "reload" or "restoration" option? How common are they in stock plans? This is premium content

This is a special feature included in a stock option at the time of grant. It provides for...

Is it possible to defer the gains on an NQSO exercise by having the shares delivered in a later tax year? This is premium content

Under a limited number of stock plans, it used to be possible to defer delivery of shares, and related taxes, to some time after exercise or vesting. However, under Section 409A of the Internal Revenue Code, this type of deferred compensation is...

Can my company lend me money to buy its stock, exercise an option grant, or pay taxes on restricted stock at vesting? Can it later cancel or modify that debt? This is premium content

Yes, but the arrangement must be carefully structured not to be considered a stock option or nonrecourse loan...

Do federal securities laws impose any reporting requirements on a public company's officers, directors, and significant stockholders? This is premium content

Yes. Section 16(a) of the Securities Exchange Act of 1934 provides that every person who is a director or executive officer (or a 10% beneficial owner) of a public company must file periodic reports of stock ownership with the SEC...

If I must disgorge short-swing profits under Section 16(b), do I still have to pay tax on those profits? Do I get a tax deduction for the disgorgement? This is premium content

Having recoverable profits under Section 16(b) for a matching purchase or sale within six months does not mean that you will report the same amount as income for taxes. You calculate the profits under Section 16(b) differently...

If I am no longer an officer or director of a public company, do I still need to meet the requirements of Rule 144 to sell my company stock? This is premium content

To satisfy Rule 144, you must follow the resale rules for...

Can I sell my options to a family trust or a family partnership to defer taxes? Are there other strategies to defer the gain on nonqualified stock options other than the deferred delivery of the shares? This is premium content

Be very careful, as IRS actions and new rules have essentially shut down the use of these techniques. Before recent developments, some tax planners advised...

My company's stock price has substantially dropped. As an executive, I want to buy the stock on the open market to show confidence to investors and analysts. Do I still need to worry about insider trading and liability for short-swing profits under Section 16? This is premium content

Yes. Your intentions do not matter under the securities laws. You cannot...

As a director, can I elect to take part of my retainer as "deferred stock units"? This is premium content

Receiving deferred stock units, or RSUs that let you delay the delivery of shares (and thus taxes) at vesting, depends on...

Does the US have an exit tax? This is premium content

Yes, but it depends on your income and financial net worth. Under IRC Section 877A, an expatriation tax applies to US citizens who...

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