Message Font: Serif | Sans-Serif
No. of Recommendations: 0
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.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.