Employee Stock Purchase Plans

Employee  Stock Purchase Plans are offered exclusively by employers and can either be nonqualified or qualified.

The three main investment concerns with ESPP’s are:

1. At what level should the executive participate, if at all?
2. When will you be able to sell the shares, and when should you sell them?
3. What steps can and should be taken to minimize concentration risk during the time before sale? 

The tax treatment on the sale of qualified ESPP’s depends if the sale is a qualifying or disqualifying disposition.

The tax on stock acquired through a qualified ESPP is lesser of the following two amounts:

• The difference between the fair market value of the shares on the date of disposition and the amount actually paid to acquire the shares, or
• The profit determined at the beginning of the offering period.

We help clients determine their level of participation in the plan and sale to maximize return while analyzing the tax consequences and concentration risk.