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Tax Qu. - Future Stock Options

Tax Qu. - Future Stock Options

Old Feb 14th 2018, 1:58 pm
  #1  
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Default Tax Qu. - Future Stock Options

Hi guys,

I have found a CPA through recommendation, and will ultimately seek their advice, but, am always interested in BE opinion. They mentioned that stock options are reportable, so here goes...

My company was founded in Asia with operations here in the US. Since starting work last year, I have been given 'units' which will equate to future stock options when the company floats..

The company intends to float in Asia, therefore, currently as a private company, I dont actually have any stock options yet, just the promise of them.

Is any of this reportable, taxable.. etc..?

Thank you!

H
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Old Feb 14th 2018, 5:18 pm
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Default Re: Tax Qu. - Future Stock Options

I suspect you don't actually understand what you have.

"Units" would normally represent shares, or a promise to provide shares after a certain number of years elapse. Once you reach the "vesting date", the shares "vest", and so become available to you.

"Options" are something slightly different - they represent an "option" to purchase the company shares at a set price, after the option vests. If the share price goes above option price, you can buy the shares at the option price and immediately sell to make a profit. Most brokers who run company share schemes in the US allow the option purchase and sale to be carried out as one single order.

If your company currently isn't listed, it sounds like you currently own a small percentage of the company, or will do once your share vests. I don't know the exact details of what is taxable or reportable, but you'll need more information to work that out.
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Old Feb 14th 2018, 5:49 pm
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Default Re: Tax Qu. - Future Stock Options

Originally Posted by Owen778 View Post
I suspect you don't actually understand what you have.
Guilty as charged, the CPA requested my contract for clarification, hope that helps resolve.
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Old Feb 14th 2018, 5:55 pm
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Default Re: Tax Qu. - Future Stock Options

Originally Posted by Owen778 View Post
If your company currently isn't listed, it sounds like you currently own a small percentage of the company, or will do once your share vests. I don't know the exact details of what is taxable or reportable, but you'll need more information to work that out.
Do you know if the recent tax bill brought into law changed the way stock options are taxed? i.e. are they taxed when they are vested?
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Old Feb 14th 2018, 6:02 pm
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Default Re: Tax Qu. - Future Stock Options

Originally Posted by PetrifiedExPat View Post
Do you know if the recent tax bill brought into law changed the way stock options are taxed? i.e. are they taxed when they are vested?
A good place to ask is on the forum at Fairmark.com - Taxes and investing in plain language Fairmark.com. Lots of good advice on taxes to be had there.
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Old Feb 14th 2018, 6:22 pm
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Default Re: Tax Qu. - Future Stock Options

Originally Posted by PetrifiedExPat View Post
Do you know if the recent tax bill brought into law changed the way stock options are taxed? i.e. are they taxed when they are vested?
As far as I know, there were no specific changes, other than the taxation rates changing.

Generally, stock awards are taxed at fair market value at income tax rates when they vest, and then that fair market value becomes the cost basis, which controls what capital gains (or loss) you are taxed at when you sell.

I believe stock options are taxed at income tax rates when you sell, and generate the profit (difference between the share's option value and sale value), but I could be wrong, it's been several years since I sold any.

Bear in mind there are two types of stock option in the US, and my comment above refers to the more common type. But it sounds like you have stock not stock options anyway.
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