Executives and early employees often find much of their wealth in one company’s stock. When the time comes to sell some, give some, or both, the first question is usually how much tax. The better first question is what kind of shares you hold, because shares that arrived by different routes carry different tax histories, and those histories decide what a sale or gift actually costs.
Every lot has a history
Restricted stock units are taxed as wages when the shares are delivered. Restricted stock is taxed as wages when it vests. An employee who receives restricted stock can instead make a section 83(b) election within 30 days after the shares are transferred, which moves the income to the date of transfer. That election is not available for restricted stock units, which are only a promise to deliver shares later.
Nonqualified stock options create wage income when they are exercised. Incentive stock options usually create no regular income at exercise but can bring the alternative minimum tax into play, and shares from an employee stock purchase plan follow rules of their own. Incentive stock options may also need separate basis records for regular tax and the alternative minimum tax. One brokerage account can hold lots from all of these routes.
One practical consequence surprises many people: the cost basis a broker reports for award shares can leave out income already taxed as wages. On the statement, a sale can look far more profitable than it really is.
| Award | When income generally arises |
|---|---|
| Restricted stock units | Wage income when the shares are delivered. A section 83(b) election is not available. |
| Restricted stock | Wage income when it vests, or at transfer with a section 83(b) election made within 30 days. |
| Nonqualified stock options | Wage income at exercise, on the difference between value and exercise price. |
| Incentive stock options | Usually no regular income at exercise, though the difference can be an AMT adjustment; the sale date decides the treatment. |
| Employee stock purchase plan shares | Income and its character depend on how long the shares are held before sale. |
| Shares bought outright | Buying at market value generally creates no compensation income. Dividends may be taxable while the shares are held; gain or loss on sale is measured from adjusted basis. |
Gain or loss on a later sale is measured from basis, which for award shares includes income already taxed as wages.
Selling: plan the payment as well as the tax
A large sale usually comes with little or no withholding, so the tax often arrives as an estimated payment for that quarter. For higher incomes, the 3.8 percent net investment income tax can apply on top of capital gains rates. Spreading sales across tax years, pairing them with losses or matching them to charitable gifts can change the total, and the right mix depends on the rest of your year. That is why we model a sale alongside everything else the year holds.
Giving: timing matters more than it looks
Giving shares held for more than a year to a public charity or donor-advised fund generally allows a deduction for their market value without tax on the appreciation, within limits based on income. A gift is complete only when the shares actually move, so a year-end gift needs to start well before December 31.
A pending sale of the company raises a subtler question. Donating shares shortly before closing may not remove the gain: once the right to the sale proceeds is effectively fixed, the donor can still be taxed on it even though the charity receives the money. The time to plan a gift around a transaction is while the deal is still developing.
The rules also changed in 2026. For the federal deduction, itemized charitable gifts now count only to the extent they exceed 0.5 percent of the donor’s contribution base, generally adjusted gross income, and for taxpayers in the 37 percent bracket, itemized deductions save at most 35 cents per dollar. Large gifts deserve a fresh look under those rules.
Where we help
We build the lot-by-lot picture, compare the alternatives, whether to sell now, sell over time, give, or combine them, and show what each would mean in tax and in cash. If you moved while your awards were earned, we also account for the states that can still tax part of that income. Your investment advisor handles the trades and your attorney any legal documents; our part is to put the tax picture in front of everyone before the decision is made.
Sources
- IRS Publication 525, Taxable and Nontaxable Income ↗
- 26 U.S.C. § 83, Property transferred in connection with performance of services ↗
- Treas. Reg. § 1.83-2, Election to include in gross income in year of transfer ↗
- IRS, Instructions for Form 8949, Sales and Other Dispositions of Capital Assets ↗
- 26 U.S.C. § 1411, Net investment income tax ↗
- IRS Publication 526, Charitable Contributions ↗
- 26 U.S.C. § 68, Limitation on itemized deductions ↗
Talk to us before the trade.
Tell us what you are considering and roughly when. We can walk through the questions that matter for your shares and what we would need to model them.
Contact our team