: Restricted Stock
FAQs
Don't confuse restricted securities and restricted stock. They are very different...
The timing of taxation is different than that of stock options. You pay tax at the time the restrictions on the stock lapse. This occurs when...
Dividends that are earned on restricted stock are considered compensation income, which is reported on your W-2 (1099-MISC for nonemployees, such as directors). The dividends can be "qualified dividends" and thus taxed at a lower rate when...
A vesting schedule dictates when you may exercise your stock options or when the forfeiture restrictions lapse on restricted stock. A schedule is time-based if you must...
Yes. Vesting schedules provide for either "cliff" vesting or "graded" vesting...
Unlike in some benefit plans, service for time-vested option and restricted stock grants is rarely...
Some companies accelerate the vesting schedule of restricted stock or RSUs if...
Successful completion of venture financing is a typical performance goal for a startup company. A public company might...
Named for the Internal Revenue Code section that authorizes it, this election is made only (1) when you want to be taxed on the value of restricted stock at grant rather than vesting or (2) when you exercise options that are...
When you forfeit the stock, you are allowed a limited capital loss deduction for any amount you paid...
No. You were optimistic that the stock price would rise. This is the risk...
Yes. Assuming the company's grant meets the rules for exemption under Section 16, the grant and vesting are not matchable...
Although normally you cannot transfer them until vesting, shares of restricted stock are issued to you and are outstanding in your name from the time of grant. Most stock plans...
The IRS has provided guidance on the limited circumstances in which this is permitted. The Section 83(b) election is irrevocable unless you show...
Yes. You forfeit whatever stock has not vested. Exceptions can occur, depending on...
Restricted stock withholding is similar to withholding for most other forms of supplemental compensation. You can have different choices for paying taxes, or your company may automatically...
Restricted stock results in ordinary income to you. This occurs either at the time...
While they are siblings, they have important differences, as explained below and as shown by the chart. The traits of restricted stock units include the following...
Restricted stock shares are issued up front at grant, but you do not own them outright and cannot sell or transfer the shares until the time-based restrictions lapse. With standard restricted stock units the situation is basically similar, while with performance shares your company sets goals that must be met, such as...
The standard option-for-option exchange is not taxable. When you exchange underwater options for restricted stock, the value of the shares...
Not as you can with stock options. With stock options, tax consequences occur when...
Restricted stock always has some value to you even when the stock price drops below the price on the date of grant...
When a company pays dividends on outstanding shares of stock, it can choose...
Technically, different tax code sections apply, though under most grants the tax results are similar. With restricted stock you are taxed at vesting or earlier at grant if you make a timely Section 83(b) election. Most experts believe that with RSUs you cannot make...
Usually the shares are legended with the restrictions, and they are often...
In a public company the shares are usually granted at no cost to you...
Yes, according to most experts. There is nothing in Section 83 of the Internal Revenue Code that states or implies that a grant of restricted stock is a single piece of property...
Yes, but the arrangement must be carefully structured not to be considered a stock option or nonrecourse loan...
In a quest to start your one-year capital gains holding period and minimize the amount of ordinary income associated with an award or grant, you may...
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