Strategies to consider at year-end

Donations of company stock

Articles on year-end planning

Highlights of new content: retirement planning with stock compensation; growing use of Rule 10b5-1 plans; changes in stock option grant provisions

Extension of AMT exemption amounts for 2007 uncertain; no AMT reform till 2008 or later

Site enhancements: currency converter; Black-Scholes calculator; quiz on stock grant basics

Corporate services to help your employees with taxes, financial planning, and life events


Financial advisors: Get to the next level with programs from U.S. Wealth Management (see and information below)

Think Twice insider trading prevention videos: educate, entertain, and jolt your employees and executives (see and information below)

FAS123 Solutions, LLC: Expert guidance through the intricacies of FAS 123(R); transition from SAB 107 simplified method for public and private companies (see and information below)


Our articles and FAQs on year-end planning are among the most popular content on our website. This content is actively used by individual subscribers, financial advisors, and companies that license our content. Below you will find selected text from two FAQs that relate to year-end planning, links to our articles about year-end planning, and links to selected new content.

Thank you for your support and wonderful comments during 2007, our best year ever both for revenue and for ongoing enhancements of our content and tools. Our new Pro membership for financial and wealth advisors had a successful year. It lets advisors track and model stock grants for multiple clients, and provides tools for proactive client communications. We are honored that CPA Wealth Provider magazine recently rated as one of the best new financial-planning products for 2007 (the feature will appear in January). We are equally pleased about coverage we received in the October issue of The CPA Journal.

We're already hard at work on content updates for 2008. For example, we have updated our popular annotated diagrams of Schedule D that show how you report sales of stock from various types of equity grants.

For more information on our membership levels and our corporate services, please email inquiries to Have a great holiday period and new year!

~ Bruce Brumberg, Editor-in-Chief


Below are two frequently asked questions (FAQs) about year-end planning. They are taken from the 700+ FAQs on All of these are available for your company to license or by Premium or Pro Membership. Please do not copy or excerpt this information without our permission.

Question 1:

What are some year-end strategies for stock options, stock appreciation rights, and restricted stock?


This depends on your financial situation, on whether your decisions should be entirely tax-driven, on what you did earlier in the year, on your outlook for your company's stock price, and on the prospects for changes in tax law during the year ahead. Below we present several situations and some strategies that many experts suggest (the full FAQ has 10 different detailed suggestions, based on your type of stock grant).

A few of the items of particular interest for year-end planning in 2007:

1. You want to gift company stock to children, elderly parents, or other relatives. If you expect your relatives, such as elderly parents with a low income, to sell the stock soon after gifting, they may want to defer the sale to 2008–2010. Next year the long-term capital gains rate for people in the ordinary tax brackets of 10% and 15% drops from 5% to 0%.

However, this capital gains rate of 0% on low incomes in 2008 will not be available to many students. In addition, if you plan to gift stock to your children for their educational expenses, be aware that the "kiddie tax" now taxes children's gains at their parents' rate until the children turn 18 (this age used to be 14). In 2008 the general age limit of the kiddie tax will rise to 19, and will apply up to age 24 for full-time students who are funding less than half of their own support. Therefore, children between 18 and 24 who are in college or graduate school have until the end of 2007 to sell stock and still be taxed at the lower rate of 5%.

For more details, see the relevant article on (For more in general about using stock grants to fund college, see Life Events: College Funding.) You also want to be aware of the yearly limits that do not trigger any reduction in your estate tax exemption and lifetime exemption from the gift tax, as explained in another FAQ.

2. You are at or close to the Social Security maximum. If your income at year-end already exceeds the Social Security wage base for the year ($97,500 for 2007 and $102,000 for 2008), by exercising nonqualified stock options (NQSOs) or stock appreciation rights (SARs) in December you can avoid the 6.2% Social Security tax (1.45% Medicare tax is uncapped). If you wait until January, your wage base for the year starts at $0 and the 6.2% Social Security tax will again apply on the exercise spread up to the new maximum for that year. Even if you will soon be over the maximum for this year, you'll save a little because the maximum additional Social Security tax will rise (adjusted for inflation) from $6,045 in 2007 to $6,324 in 2008.

3. Your restricted stock vested this year. This year you may have had your first vesting of restricted stock and restricted stock units (RSUs). Unlike stock options, which trigger taxes when you choose to exercise them, restricted stock gives you no control over the timing of your taxes (unless you have a special type of RSU with deferral features). You own the stock outright and have taxable W-2 income at vesting. Therefore, you can try to plan the timing and shifting of other income around this income and you need to evaluate near year-end whether to keep holding the stock.

For the remaining tips for year-end planning, read the full FAQ.

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Question 2:

What is the tax deduction for donations of my company stock?


The tax treatment for this popular year-end strategy is the same as it is for donations of any stock to a qualified charity (gifts of stock are covered by another FAQ). When you have held the stock for more than one year, at the time of the donation you get a tax deduction for the fair market value of the stock (not for your cost basis).

For public companies with an active market in their stock, the fair market value is the average between the high and the low stock prices on the delivery date, unless the stock is still subject to resale and transfer restrictions. For stock of pre-IPO companies, you need a valuation by appraisal. The delivery date is when the stock is valued and determines the deduction year. When the sale of the appreciated shares would have triggered long-term capital gain, your deduction is up to 30% of your adjusted gross income (20% for family foundations), and you can carry forward amounts over this for five years.

Read the full FAQ for an example, an alert on timing mistakes to avoid for year-end stock transfers to get the proper tax deduction, and the tax treatment when the stock is held less than one year.

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Stockbrokers' And Financial Planners' Year-End Secrets (Part 3): What We Tell Our Best Clients, by W.E.B. Bantling and Michael Beriss
By the time your W-2 or 1099 has arrived, it's too late for year-end tax planning. As these financial advisors stress, the time for tax planning is now. This year, several particular concerns apply to employees with stock options and restricted stock. Read the article, free to all registered users through December!

Ten Ideas For Year-End Stock Option Tax Planning, by Martin Nissenbaum This is premium content
Doing some year-end or year-beginning planning with stock options and company stock? While investment objectives, not taxes, should drive your decisions, this article presents some tax-planning ideas from the former National Director of Personal Income Tax Planning at Ernst & Young.

The ISO Tax Trap And The AMT Credit Myth: What To Do Before Exercise And At Year-End, by Alan Ungar This is premium content
Avoid the risks of the alternative minimum tax (AMT) when exercising and holding incentive stock options (ISOs) for long-term capital gains. Read this article by a noted CFP and author of books on financial planning.

Stock Option Financial Planning After Your Tax Return Is Filed And At Year-End (Part 1), by Tom Davison and Liam Hurley This is premium content
Right after you have completed your taxes is a great time to do your big-picture financial planning. At the end of the year, review your analysis and strategy again. Read this article, co-written by highly respected financial planner Tom Davison, a member of our advisory board.

Content with the This is premium content symbol requires Premium Membership.

Insider Trading Prevention And Education:
Think Twice Video And Intranet Series
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With insider trading cases in the news, now is a good time for insider trading education and focusing on your compliance program. The dramatic Think Twice video series will teach, entertain, and jolt your employees and executives about insider trading and securities fraud. Used by over 1,000 companies and developed with input from the SEC Enforcement Division, these powerful videos with memorable story-lines will drive home key points on

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For more information on the Think Twice video series, and a free white paper on insider trading prevention and education, see Both VHS and DVD formats are available. Qualified corporate buyers, including pre-IPO companies, can request free previews. Intranet licensing is available.


Here are more selections from's newest award-winning educational content. All of these are available to our Premium and Pro Members and our licensees:

Stock compensation and company stock in your 401(k) plan can boost retirement savings and lifestyles, with appropriate financial and tax planning, as explained in a new article in the Stockbrokers' Secrets series. See Life Events: Retirement.

New data on the increasing use of Rule 10b5-1 trading plans by executives seeking to diversify their company stock. See the FAQ in SEC Law: Rule 10b5-1 Plans.

Companies are changing the design and structure of their stock option grants, as explained in an updated article on the grant provisions you can expect. See the article in Basics: Core Concepts.

Understand the important issues in negotiating provisions for grants of stock and options at pre-IPO companies. See the second article in this two-part series by attorney Alisa Baker in Job Events: Job Search & Negotiation.

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On November 9, the US House of Representatives passed a tax bill that includes a provision to extend the 2006 AMT income exemption amounts through 2007, slightly increasing them for inflation: see HR 3996, the Temporary Tax Relief Act of 2007 (read the summary). The proposed 2007 exemption amounts are $44,350 for single filers and $66,250 for joint filers.

The bill has moved to the Senate. However, the Senate will probably pass only a compromised version, and the final bill is not expected to emerge until mid-December—later than many had hoped. The sticking point is Republican opposition to the bill's provision for offsetting the loss of AMT revenue by raising tax rates for the managers of investment funds. Senate Democrats, who mostly support the House bill, do not enjoy the big majority their colleagues have in the House, so they may need to make concessions to pass the AMT patch. Before the Thanksgiving recess, a Democratic effort to pass the House bill by unanimous consent was blocked by the Republican Senate Minority Leader (see the press release from the Senate Finance Committee). Our sources on the Senate committee tell us that Chairman Max Baucus (D–Montana) plans to move on the AMT patch as soon as possible after the Senate reconvenes this week.

The urgency to pass the patch is twofold. First, without it the AMT exemption amounts in 2007 will return to the levels of 2000, wreaking the AMT on about 25 million taxpayers, many of them middle-income families. Second, the IRS says it will need at least 10 weeks from the bill's enactment to reprogram its computer systems for the extended exemptions. If the IRS does not have enough time to catch up before the start of the tax-return season in January, many millions of tax refunds will be delayed.

On October 25, 2007, Charles Rangel (D–New York), the Chairman of the Ways and Means Committee in the House of Representatives, announced a mammoth tax bill whose provisions include a "permanent repeal" of the AMT (the Tax Reduction & Reform Act Of 2007, available in full draft form or a summary). Congress is expected to consider this bill in 2008, but the controversy about offsetting AMT repeal by raising tax rates elsewhere has clouded the prospects of AMT reform.

For details on these issues, see the FAQ on where we cover legislative developments that affect the alternative minimum tax. Read about how the AMT works and related financial and tax planning in the sections ISOs: AMT and ISOs: AMT Advanced.

Expert Guidance in Stock Option, Restricted Stock and ESPP Valuation and Plan Design

FAS123 Solutions can help your company transition from the SAB 107 short-cut method for determining expected term. Our large database of comparable companies provides invaluable support for your company when there is limited exercise data.

We also assist Compensation Committees with the design of market and performance based awards; Treasury and tax departments with forecasts of cash flow from option exercises as well as dilution and tax benefit analysis; HR departments with current valuations of each employee's option holdings.

We have helped many companies with repricings, option exchanges and option modifications.

With over 150 client companies, we have a 100% record in passing audits and satisfying clients. Email or call (800) 732 0834.


We keep our development staff busy with continual large and small enhancements to our website, along with updates and additions to our content. This year, our enhancements included the newest grant alert you can receive on target stock prices (great for helping you know when to execute your exercise and stock sale strategies, such as with a Rule 10b5-1 plan). We also introduced an interactive feature that lets you write and submit comments on any of our articles; after approval, your comments appear at the end of the article. Now you can add an observation, challenge a point we make, or start a debate, further enhancing the engaging appeal of our expert articles.

In the past month alone we have introduced several useful little features:

  • A currency converter in myRecords and the Global Tax Guide lets you calculate the value of your stock grant gains in the currencies of over 150 countries throughout the world.

  • A new free quiz on the basics of stock grants provides links to relevant content in the answer key, giving you or your employees a neat e-learning course. It joins other free quizzes available on our home page, plus a quiz offering six CE credits for registered CFPs.

  • In response to popular demand, we have introduced a calculator for assessing the Black-Scholes value of stock options. You will find it in the Quick Take Stock Options Calculator, which is available to all registered users, whether Basic, Premium, or Pro.

We have a busy schedule of developments for 2008. Your comments are welcome. If you have a suggestion for our content or tools, please email it to

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CORPORATE SERVICES Helps You And Your Employees With Taxation, Financial Planning, And Life Events

Are you adding or switching to restricted stock, restricted stock units (RSUs), performance shares, or stock appreciation rights (SARs)?

Our innovative Knowledge Center is a popular corporate service from that can strengthen your stock plan education, particularly when you are changing your stock plan and making new grants. Companies and stock plan service providers are licensing this package of our award-winning educational content, interactive quizzes, and dynamic animated calculators/modeling tools.

The Knowledge Center and calculators can be quickly and seamlessly integrated into your HR, benefits, or compensation portal. This includes all of our Premium content and features and is automatically updated. No user sign-in is required.

  • Strengthen your stock plan communications and education.

  • Help employees understand and appreciate these new types of stock grants and make smarter decisions.

  • Reduce staff time and expense by letting the content of answer employees' questions about taxes, financial planning, life events, and more.

Select all or a portion of's expert content, quizzes, and calculators. For more information on our corporate services, call 617-734-1979 or email

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