Executive Tax and Compensation Planning

• Stock plan analysis (ISOs, nonqualified, and stock purchase plans)
• Analysis of stock sales strategies (puts, calls, collars) and year-end planning
• Stock sales strategies and related year-end planning
• Deferred compensation plans (e.g. rabbi trusts)
• Income tax planning for alternative minimum tax
• Structuring compensation and profit sharing in joint venture agreements
• Preparation of income tax returns (federal, state and city)
• Review of term sheets for key hires
• Review of corporate insurance plan for executives
• Income tax preparation, estimated taxes
• Representation before IRS and state tax authorities

Implementing a Collar Strategy to Eliminate Market Risk on Founder's Stock

Our client successfully merged his company into a larger private company immediately prior to its going public. In an effort to protect the equity position during the 6 month lock-up period, we explored various hedging and collar strategies which limited both the upside and downside of the stock due to the client's concern about market volatility. We introduced our client to two Wall Street firms with extensive derivatives experience and helped to execute an effective sales strategy and followed up with a detailed tax planning to minimize and defer tax on stock gains.

Executive Transfer With Stock Options Gets Tax-free Step-up in Basis

In late 1999, a foreign executive holding a large block of unexercised non-qualified stock options was transferred to the U.S. publicly traded parent company in Silicon Valley. After reviewing the company's stock plan, we advised the executive to exercise his options before the end of the year, thus accelerating the recognition of income. However, since the executive was a nonresident for all of 1999, and the income from the stock spread was all foreign source, there was no U.S. tax payable on the exercise, and following the exercise, the basis of the stock stepped up to its fair market value.

Tax Planning for Company President's Stock Options Gets Complex

Our client had substantial spreads in qualified and non-qualified stock options. We performed a number of projections to factor in when certain options should be exercised, how to minimize both the income tax and estimated tax payments and how (with cash or appreciated stock) the individual should make contributions to his private foundation. We discussed tax issues several times during the year and advised about gifting large amounts of stock to his family foundation and how to structure gifts and prepay state tax at year-end and still avoid alternative minimum tax.

Company President Benefits from Tax Research and Court Case, which Excludes Benefits from Income

Our client, the president of a national distributor, needed guidance concerning executive perquisites. We provided detailed research on certain company allowances, and explored the Income Tax Regulations and Congressional intent where the statute seemed too ambiguous. Our research unearthed a Tax Court Case on point, which substantiated the exclusion of certain corporate benefits from taxable income.

Successfully Negotiating a Settlement with IRS Takes Time and Resourcefulness

The CEO of a publicly traded company had previously entered into a major investment, which was challenged by the IRS to be a tax sham. We were retained executive to represent our client before the IRS on both domestic and international tax issues. Over our two-year period of representation at the exam and appellate level, all penalties were eliminated; we also had legal counsel retained to protect certain privileges and persuaded the IRS to settle on the domestic issues only without reviewing international holdings.

Determining whether Restricted Stock Rights Qualified for Capital Gains Treatment

In this case, a foreign national and CEO of a U.S. publicly traded company entered the U.S. in possession of significant holdings in stock awards, which were only partially vested. We were retained to analyze the taxation of the stock award and prepare the U.S. returns. We determined that the stock award constituted vested property rights prior to becoming a U.S. resident which eliminated all ordinary income.

Stock Plan

A San Francisco high technology company requested our advice about how to best structure an incentive package for its key executives. We met with the company's owners and executives and reviewed the goals and "exit strategy" from the perspective of both the company and the executive team and advised the company to adopt a stock reward plan vesting over 3 years based on the executive's performance. We worked together with the company's counsel to draft and execute the stock award plan.

Executive Stock Options Strategy

An executive of a well-known Internet search engine company, at the pre-IPO stage requested our advice in strategizing his exercise and sale of a significant number of vesting incentive stock options. We performed several alternative calculations and performed analysis from both tax and cash flow perspectives. We advised the client to "early" exercise his options prior to IPO and make a Section 83(b) election to "lock-in" a low ordinary income spread and to take maximum advantage of capital gain rates.

Executive Year-end Planning

Our client, a founder of a Silicon Valley public company, had significant income in 1999 from his exercise and sale of stock. We reviewed year-end strategies and estimated alternative minimum tax exposure. By timing estimated state tax payments and exercise of incentive stock options, we mitigated the effect of alternative minimum tax, which resulted in significant tax savings, and full utilization of significant state income tax deductions.