What is the difference between restricted stock for tax purposes and restricted stock for securities law purposes?
A. Taxation occurs when vesting is completed or payment is accelerated; securities law restrictions apply to the sale of unregistered stock.
B. Taxation occurs when vesting is completed or income recognition is accelerated; securities law restrictions apply to sale of unregistered stock.
C. Taxation occurs when exercise is completed or payment is accelerated; securities law restrictions apply to the purchase of unregistered stock.
D. Taxation occurs when exercise is completed or income recognition is accelerated; securities law restrictions apply to the purchase of unregistered stock.
Answer:B
What is the difference between restricted stock for tax purposes and restricted stock for securities law purposes?
A. Taxation occurs when vesting is completed or payment is accelerated; securities law restrictions apply to the sale of unregistered stock. B. Taxation occurs when vesting is completed or income recognition is accelerated; securities law restrictions apply to sale of unregistered stock. C. Taxation occurs when exercise is completed or payment is accelerated; securities law restrictions apply to the purchase of unregistered stock. D. Taxation occurs when exercise is completed or income recognition is accelerated; securities law restrictions apply to the purchase of unregistered stock.
Explanation: Under restricted stock award plans, companies grant shares but restrict them for a time after grant. The recipients, who may or may not pay anything for the shares, cannot take possession of them until the specific restrictions lapse, and thus are not taxed until they receive the shares, unless they file an 83(b) election to accelerate the recognition of income to the date of grant. For securities law purposes, "restricted stock" generally refers to unregistered shares and the restrictions on sale of such unregistered securities.