What are the tax implications of a stock split for non-US residents?

December 10, 1999

Subject:   Non-Qualified Stock Options Question
Date:   Fri, 19 Nov 1999
From:   Clare


I have some queries about out stock-options at work, that I would be really grateful if you could answer, as the information we are getting is not very clear to those of us not experienced in financial trading.

We are in a UK office of an American company. We have non-qualified stock options in the US. We receive an allowance of 400 a year over three years, which we get in January. This started this year (1999).

Some of us have already sold this year, some have not as yet. All of us are planning what to do with the options we will be able to exercise in January. This is particularly important as we are going to be affected by company redundancies taking place on the 31st January.

Now we have received information that a three-for-two stock split is to be effected (as a 50% stock dividend). The new shares will be distributed December 30, 1999, to shareholders of record as of the close of business on December 15, 1999. Cash will be paid in lieu of fractional shares.

We are uncertain how that affects our status, in particular for those who have not yet exercised their shares this year. Also for those of us being made redundant, our redundancy date is 31st January – will we benefit from this 3/2 split?

We would be really grateful for any explanation or advice you can offer.

Many thanks
Bristol, UK


Hello Clare,

Thanks for writing.

You really need to talk to the people in your corporate benefits office.

In most cases, the shares of outstanding options are adjusted for stock splits.

For example, when there is a 3:2 stock split, and the option was originally for 100 shares at $1.50, the option is adjusted to 150 shares at $1.00.

I hope this helps.

Good luck!

Mike Gray

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

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