executivecap

The Uniqueness of Stock Options Unlike any other type of investment, Stock Options have three unique characteristics that set them apart from the crowd. 1.   Rapid Appreciation Stock Options have tremendous upside potential.  In general a stock option may appreciate more than the underlying stock it represents.  For example, a 25% increase in the value of the stock may result in a 40% or 50% (+) increase in the option value.  As the stock appreciates, the options will normally... Read Full Story

Did you know …….”Executives of public companies represent the largest segment of share holders with concentrated stock .”  By our definition, any one position that represents more than 20% of a portfolio is considered a concentrated position. Why is this ?  The number one reason executives of public companies hold concentrated stock is through the issuance of stock grants or options as part of their compensation; i.e. equity compensation . Consequently, the factors behind why executives... Read Full Story

Simply stated, there are two components that make up the value of a stock option.  In order to better understand the value of stock options we need to become familiar with these two components referred to as the intrinsic value and the time value. Breaking it down to the next level, we  define the intrinsic value as the difference between the current stock price and the exercise price. For example :   Let’s examine the event of 5,000 stock options issued at $25 per share.  At the time of... Read Full Story

Taxation of Incentive Stock Options – ISO’s In this, my fifth and final submission to the blog series on the taxation of different equity awards, we examine the “Taxation of Incentive Stock Options” or ISO’s, the benefits and tax implications. Tax Benefits :   Holders of ISO’s are eligible for certain potential tax benefits that are not available in the previously discussed equity awards.  The main tax benefit of ISO’s is the ability to convert compensation income into long-term capital... Read Full Story

Nonqualified Stock Options As the series continues, Part 4:  Non-qualified Stock Options are explored as we compare similarities, differences, tax implications, and timing for exercising options.  See example below: As mentioned in my previous blog, Non-qualified Stock Options (NQO’s) are similar to Stock Appreciation Rights (SAR’s).                                          What are the differences ?   The main difference is that SAR’s provide the holder with the right to receive cash... Read Full Story

In this five part series we have covered the tax implications of Restricted Stock Grants and Restricted Stock Units.  In part three, we will be discussing the tax implications of Stock Appreciation Rights (SAR). What are Stock Appreciation Rights : Stock Appreciation Rights (SAR’s) provide the executive with the right to receive cash in the amount of increase in value of a specified number of shares. The following are some common questions and answers about SAR’s that should help define... Read Full Story

Restricted Stock Units; Part 2 of my five-part blog series on the tax implications of the five types of equity compensation :      Restricted Stock Grants, Restricted Stock Units, Stock Appreciation Rights, Non-qualified Stock Option, Incentive Stock Options   Throughout this series, we will discuss the tax implications of each of the five types of equity compensation first as described in my previous blog published 11/29/2011 (“Five Types of Equity Awards”).   In my previous blog, Part... Read Full Story

This is the first entry in a five-part blog series on the tax implications of the five types of equity compensation.  Throughout the the series, we will discuss the tax implications of each of the five types of equity compensation, as described in my previous blog published 11/29/2011 (“Five Types of Equity Awards”). Part One: We will begin part one by focusing on Restricted Stock Grants.  A restricted stock grant is stock that a company issues to an employee and is restricted (not vested... Read Full Story

Knowing the different types of equity awards that corporations issue and what the executive owns is important. • Restricted Stock Grants These awards of company stock are referred to as restricted because the executive is restricted from selling the shares for a period of time. Usually this is through a vesting schedule so that employee will forfeit some or all of the shares if they terminate before the shares are vested. • Restricted Stock Units (RSU’s) The main difference between... Read Full Story

One of the more common questions I am asked from clients is “What are the tax consequences of owning stock options?” This remains a hot topic for discussion at any time of the year. As tax season quickly approaches, having a thorough understanding of the tax implications involved can be crucial to minimizing taxation exposure . A more in-depth, comprehensive look at the tax consequences will be explored in a later blog to come. For the purposes of this discussion, I intend to illustrate a... Read Full Story