Joanna Glasner and Bruce Brumberg
Don't be discouraged by stock market volatility and underwater stock options. As the experts note, stock grants are tools for building wealth in the long term.
W.E.B. Bantling
Market volatility and declines rattle even the most experienced holders of stock compensation (and their advisors). Here are 10 topics I find myself discussing over and over again with my best clients.
Michael Beriss
When stock markets rise, question the urge to exercise your options for quick profits as soon as possible. Exercising too early can be a big mistake.
Alisa Baker
In Part 4 we consider the taxation of employee stock purchase plans (ESPPs) that are not qualified under Section 423, and the tax issues of down markets, death, and withholding.
Loren Rodgers
You may feel let down by your stock options if your company's stock price has dropped, leaving your options underwater. Getting less than you expected is something that inevitably occurs in a free market, and it is helpful to be prepared for losses as well as gains.
David McCann and Alix Stuart
CFO
The post-2008 economic downturn has seen less exchanging and repricing than earlier downturns. Because shareholder approval is often required to change underwater grants, companies are adding features to make their approaches to underwater options acceptable to shareholders.
Dan Caplinger
Motley Fool
Though many stock options sink underwater during a market downturn, option grants usually have a 10-year term, giving them plenty of time to become valuable again as your company's stock price recovers.
Sara Hansard
Financial Week
Companies are considering ways to deal with underwater stock options, either by repricing them or by exchanging them for grants of restricted stock. Your company needs to balance various interests, including employee motivation and retention on one hand and shareholder skepticism on the other.
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Underwater stock options have an exercise price which is greater than the market price of the underlying stock. For various reasons, you do not want to...
Changes in executive compensation and equity pay practices stemming from the downturn of 2008 and 2009 were predicted to be extensive and vigorous. Experts at consulting and research firms have been busily analyzing corporate stock plan practices since then...
No. When your exercise price (e.g. $10) is higher than the...
Wishful thinking! Just as you are not taxed on the value of the options at grant, you may not write off any expired unexercised options, whether underwater or in the money...
An options exchange is an alternative to repricing underwater stock options. Most companies set an exchange ratio of underwater options for new ones at the current market price so that the total value of the new options is equal to that of the previous options. Alternatively...
The number of companies, and their employees, with underwater stock options has substantially increased, especially since the historic drop of the stock markets in October 2008. Various surveys and corporate examples show that...
Deciding whether or not to accept an options exchange involves many variables, including the potential for...
With approval from the board, and perhaps also shareholders, your company can modify outstanding grants in a way that is consistent with its stock plan. However, it should avoid tax pitfalls for you and the company, such as...
While stock option exchanges usually do not create tax consequences for participants who are US tax residents, employees who are tax residents of other countries may be taxed when...
Very few companies arrange a straight repricing of outstanding options. Companies concerned about widespread and deeply underwater options may offer...
The standard option-for-option exchange is not taxable. When you exchange underwater options for restricted stock, the value of the shares...
This is wishful thinking, because these are two separate transactions. It does not make sense to...
Employee stock purchase plans cannot be "underwater" in the traditional sense of having a purchase price greater than the current stock price. Down markets can create special opportunities and unique issues for ESPPs. For example, with an ESPP...
Not in the way stock options can. Restricted stock is worth the full market value of the stock when it vests (or, with restricted stock units, when shares are delivered). It does not matter if...
Generally, the exercise price cannot be raised without your written consent...
You recognize ordinary income for the full value of the cash payment. Any deferred portion of the cash sale proceeds is not taxable until...
This depends on the provisions in your stock plan and the structure of the merger or acquisition. According to the flexibility for adjusting outstanding grants that your company's stock plan provides, the buyer can...
This depends on whether the ISOs are already vested. According to the final IRS regulations on ISOs...
In a public company you would never exercise underwater stock options. In a private company...
When the net intrinsic value of the stock is zero, the attorney for the nonemployee-spouse has two ways to obtain...
When options are exercised, generally the estate or beneficiary is able to take an income tax deduction for the amount of estate taxes already paid by the estate. But when they are not exercised you cannot take the deduction against other income...
Microsoft was one of the first companies to have an underwater options exchange for cash, and did so long before the market downturn in 2008. According to a statement the company issued on...
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Tax errors can be costly! Don't draw unwanted attention from the IRS. Our Tax Center explains and illustrates the tax rules for sales of company stock, W-2s, withholding, estimated taxes, AMT, and more.
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Stomach Volatility In Your Company's Stock Without Losing Your Mind 
