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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15198
Experience:  15years with H & R Block. Divisional leader, Instructor
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You probably answered the question here but if I can ask a

Customer Question

You probably answered the question here but if I can ask a simpler question: I have been offered 35% of a company's equity after working almost two years as one of the first employees for no salary. Do I get taxed on the value of the 35% in the year that the shares are granted. Secondly, the value of those shares is highly debatable given the companies early stage, could be tens of thousands or hundreds of thousands depending on your point of view. The company is a limited liability company in the uk by the way. I am a US expat.
Submitted: 3 years ago.
Category: Tax
Expert:  Robin D. replied 3 years ago.

Robin D :

Hello and thank you for using Just Answer,

In most cases, if you receive property for your services, you must include its fair market value in your income in the year you receive the property. However, if you receive stock or other property that has certain restrictions that affect its value, you do not include the value of the property in your income until it has been substantially vested. (You can choose to include the value of the property in your income in the year it is transferred to you rather than the year it is substantially vested.)

Until the property becomes substantially vested, it is owned by the person who makes the transfer to you, usually your employer. However, any income from the property, or the right to use the property, is included in your income as additional compensation in the year you receive the income or have the right to use the property.
Property is substantially vested when:

  • It is transferable, or

  • It is not subject to a substantial risk of forfeiture. (You do not have a good chance of losing it.)

Property is transferable if you can sell, assign, or pledge your interest in the property to any person (other than the transferor), and if the person receiving your interest in the property is not required to give up the property, or its value, if the substantial risk of forfeiture occurs.


Robin D :

You stated you are an expat. In true tax terms that means you have given up your citizenship or long term residency. Do you mean to say that you are not working in the US or have you filed all documents to relinquish your citizenship?

Robin D :

If you make the choice to include when you receive, the substantial vesting rules do not apply and, generally, any later appreciation in value is not included in your compensation when the property becomes substantially vested. Your basis for figuring gain or loss when you sell the property is the amount you paid for it plus the amount you included in income as compensation.

Robin D :

The system showed you entered then stepped out of the CHAT.

Robin D :
JACUSTOMER-p6pz2b1b- has entered this chat!

11:32 AM

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Robin D :

Please respond so I know you can view my post to you above.

Robin D :

I can switch to regular Q&A but we will not be allowed to CHAT in real time if I do.

JACUSTOMER-p6pz2b1b- :

that's very helpful, thank you!

Robin D :

You are most welcome

Robin D :

Your positive rating is always thanks enough.

Robin D :

Plus, rating tells Just Answer that you were assisted.

Robin D :

Did you need something else before you rate?

Expert:  Robin D. replied 3 years ago.

Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

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Expert:  Robin D. replied 3 years ago.
Wanted to touch base with you and make sure all worked out.