- Our editorial team has been busy during the past three months with content additions and updates on various tax and financial-planning topics. Highlights include:
As financial advisor Tom Davison writes in a new article
, your option grant terms and the behavior of your company's stock price are only part of your financial-planning story in volatile markets. Equally important is the price movement of what you will buy or invest in with the proceeds from an option exercise and stock sale. Relative changes in price, not absolute changes, are what matter.
Keep Up With Shifting Corporate Stock Grant Practices
Changes in executive and equity pay practices during the current downturn may eventually be far more wrenching than those caused by the 2000-2002 market drop: more affected companies, a steep rise in unemployment, stricter rules on disclosure and shareholder approval, and ongoing changes in tax and accounting rules. Learn about the potential impact on your company, and you, in a new FAQ
AMT Trigger Points In 2009
A must-read for anybody concerned about triggering the alternative minimum tax this year, an updated FAQ
on myStockOptions.com presents a table and graph which estimate the tipping point for positive adjustments such as ISO exercises that, when added back to your taxable income, can trigger the AMT. These figures use the AMT income exemption amounts enacted under President Barack Obama's economic-stimulus bill, the American Recovery and Reinvestment Act. This set the AMT income
exemption amounts for 2009 at $70,950 for married joint filers and $46,700 for single filers, before phaseouts.
Grantor Retained Annuity Trusts: Hurry Before The Tax Rules Change
Tax law changes are being proposed in many areas, including the taxation of capital gains
, ordinary income, and estates. We are actively following these to explain how they affect your strategies
For example, the grantor retained annuity trust (GRAT) is one of the best techniques, especially in the current down markets, for transferring company stock or other investable assets to family members with little or no estate or gift tax cost. However, legislative changes recently proposed by the Obama administration would have an adverse impact. In a new article
by estate-planning attorneys Elyse Kirschner and Carlyn McCaffrey, learn about the GRAT technique before the tax rules change. Another new article on estate planning
covers the use of company stock to fund charitable donations and foundations.
New Rules For Selling Call Options On Employee Stock Options
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.
In May 2009, the CBOE and the ISE proposed a margin requirement change
to the SEC, which approved it
on June 17, 2009. This change in the rules lets vested employee stock options be considered usable collateral for selling listed call options on the underlying stock. If your company agrees to allow this, you will not need to put up any additional collateral. You will need to pledge your vested options to a broker-dealer and provide it with an irrevocable power of attorney authorizing it to exercise the options on your behalf when required. However, there are also risks involving the securities laws and taxation. See three articles on myStockOptions.com:
Underwater Options Prompt Various Approaches By Companies
Amid fallen stock prices and underwater options
, companies are trying to salvage the value of existing stock option grants, especially now that stock prices are starting to stabilize and even recover. The most common approach involves exchanging options, whether for other options, for restricted stock
, or for cash. Details, tax issues, and current examples of these exchange programs are covered in the relevant FAQs
Try our new tool!
We have developed a new tool to help you see the financial advantages of participating in an option exchange. It shows you the break-even point and appreciation needed for the value of the old grant to at least equal the value of the new grant on the basis of your exchange ratio. For access to our break-even tool
for underwater stock options, email firstname.lastname@example.org
for a special user name and password.
Missed a past update? See our whole archive of email newsletters, content reports, and topical alerts.