Robert Gordon
NEW! 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.
Chris Murphy
UPDATED! 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.
Robert Gordon and Charlotte Lyman
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.
Robert Gordon
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.
Mark Miller
UPDATED! For employees and executives, international travel and relocation are increasingly common. The taxation of "mobile employees" is always complex, and never more than with equity compensation. Part 1 introduces the key concepts and rules, including the sourcing and apportioning of income.
Mark Miller
International assignments or relocations can present attractive opportunities for career advancement. However, the taxation of equity compensation for mobile employees raises complex issues. Part 2 looks at specific scenarios, withholding taxes, and tax equalization.
Robert Gordon and Charlotte Lyman
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.
Robert Gordon and Charlotte Lyman
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.
Robert Gordon and Charlotte Lyman
After understanding hedging basics, you need to answer a few questions and decide whether your goals go beyond risk reduction to liquidity creation.
Robert Gordon and Charlotte Lyman
UPDATED! 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.
Stanley Trotta with Robert Gordon
For now, it appears we have dodged a tax-increase bullet. However, President Obama's proposals will probably raise taxes after 2010. Should you take action with stock options now or wait until new rates apply? Part 1 looks at nonqualified stock options.
Alisa J. Baker
You may find a gap between what you expect from your equity compensation and what you receive. Often the problem stems from the complexity of the related documents and rules. Learn about them, and understand why you must focus on conflicting or inconsistent provisions.
Alisa J. Baker
NEW! Part 1 looked at the problems of conflicting or inconsistent provisions among different documents. Part 2 discusses which existing documents and rules nonfounder executives must consider when negotiating for equity compensation during the early (pre-public) stages of a company's development and growth.
Carol Cantrell
You have stock options with a large spread, don't need the money, and want to defer the tax upon exercise as long as possible. But you also want to minimize the risk of owning a single stock. Learn about the possibility of substituting a nonqualified deferred compensation plan for your unexercised options.
UPDATED! Finding legal techniques to minimize taxes is almost as popular in the US as stock options. Sophisticated techniques with founder's stock and options can avoid or defer taxation.
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.
Matt Ericson and Alan McLean
The New York Times
This interactive article presents the compensation and wealth accumulation of the highest-paid CEOs. The figures, including the value of stock and options awards, are calculated from companies' proxy statements.
Megan Johnston
Financial Week
The IRS is targeting certain types of variable prepaid forward contracts, which some senior executives and founders with substantial company stock holdings have used to get cash for their shares without selling.
Ronald Fink
CFO
The usual ways in which high-net-worth executives diversify stock or defer taxes, including prepaid forward contracts, equity collars, exchange funds, or charitable remainder annuity trusts, all raise tax issues or other concerns. Some experts suggest that, with capital gains rates so low, it's better to just sell now.
Geoffrey Colvin
Fortune
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.
Alyn Ackermann
Financial Advisor
Executives with both concentrated positions in company stock and retention requirements need to understand the risks and strategies.
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.
Internal Revenue Service
Summarizes the fundamental tax issues to consider with this type of compensation, which can include stock grants, along with the hot spots for IRS review that can trigger taxes earlier than you want.
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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...
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...
A number of tax law provisions and interpretations that may affect your stock grants occur in the wide-ranging American Jobs Creation Act (AJCA); the final regulations on deferred compensation under Section 409A, which adopt the...
Restricted stock refers to outright grants of company stock to employees or other service providers. It is "restricted" because...
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...
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...
You are in luck. SEC Rule 10b5-1 now provides an affirmative defense...
Starting on January 26, 2003, during any 401(k) blackout period directors and executive officers...
Using a blind trust goes beyond the protections of Rule 10b5-1 plans, yet has more restrictions. These are irrevocable grantor trusts with...
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...
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...
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...
This depends on the approach you take. Under the 2003 tax cut, "qualified" dividends are taxed at a top rate of...
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...
This is a special feature included in a stock option at the time of grant. It provides for...
A reload encourages you to exercise the original stock options earlier than you otherwise might have. This lets you...
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 American Jobs Creation Act of 2004 (AJCA), this type of deferred compensation is...
Yes, but the arrangement must be carefully structured not to be considered a stock option or nonrecourse loan...
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...
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...
To satisfy Rule 144, you must follow the resale rules for...
Yes. Your intentions do not matter under the securities laws. You cannot...
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...
Receiving deferred stock units, or RSUs that let you delay the delivery of shares (and thus taxes) at vesting, depends on...
Yes, but whether it applies to you depends on your income and net worth. Effective from June 17, 2008, the Heroes Earning Assistance and Relief Tax Act of 2008 (HEART), which mostly gives benefits to members of the armed forces, includes a modification to the US exit tax (IRC Section 877A). If they meet certain conditions, US citizens...
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