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Author: Patzer Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121562  
Subject: Re: Question about restricted stock Date: 9/10/2012 5:11 PM
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It's not unusual for the FMV of the vested shares to be included on your W-2 (your wife's in this case) in the year the shares vest.

I'd like some clarification on terminology here. I have a small amount of restricted stock. In the terminology my employer uses, it becomes "vested" in 3 tranches, one, two, and three years after the award. It doesn't become "unrestricted" until after three years.

What this means under the restricted stock plan is, if I leave the company tomorrow I'm entitled to receive 2/3 of the stock. If I stick around for the rest of the third year, I can get all of it without leaving the company.

My understanding was that I would realize ordinary income of the fair market value of the stock when it becomes unrestricted; should this have been happening in tranches as it vested, or am I looking at the same term being used differently for different purposes?

FWIW, the dividends show up on my paystub and W-2 as ordinary income, with appropriate tax withholding. My understanding is that they should become qualified dividends when the stock becomes unrestricted.

My current thinking is to get the shares issued to me when they become unrestricted and put them in my brokerage account. At that point, they can be managed like any other holding. I might have the option to leave them in my employer's custody after they come off restriction, but I don't see any upside in that arrangement.

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