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Subject:   Taxes on non-qualified employee stock options.
Date:   Tue, 9 Mar 1999
From:   Troy

Michael,

Myself and others within my company are looking for ways to minimize the tax impact on the nonqualified employee stock options which we have received from our company.

We work for Sterling Wentworth Corporation which was recently aquired by Sungard Data Systems.

Is there anything that can be done to reduce the tax burden?

I found some information at: http://www.taxhavenroadmap.com/ca_stock_option.html which seems to indicate that the liability can be eliminated with the use of an offshore entity, but I can't get any information on this strategy. Do you know if this is possible?

Thank you for your assistance.

Troy

Answer

Date:   Sun, 21 Mar 1999

Hello Troy,

If you haven't already done so, please request a copy of our report, Non-Qualified Stock Options - Executive Tax and Financial Planning Strategies.

Don't let the "tax tail" wag the dog.

There are issues of timing, elections when the stock received is restricted or not vested, etc., but if you receive the benefits of receiving the stock at a bargain price, there is going to be a taxable event.

I would not endorse using offshore trusts to avoid the tax. You have to give up control of the assets and not have access to them in the U.S. to have a hope of avoiding tax. Do you really want to do that?

Be grateful for the gift that you have, and plan how and when you will benefit from it.

Good luck!

Mike Gray

For more information about non-qualified stock options, request our free report, Non-Qualified Stock Options - Executive Tax and Financial Planning Strategies.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.