Shares bought with employee purchase program - but what now?

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fme

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Hi all,
I am sure I am not alone in this position so perhaps this is relevant for some others out there..
I have invested in my (US multinational) company shares for a while now, but, as I have read in various places that it is often best to diversify, I am wondering at what point should I perhaps sell some of these to invest in other shares - should I do so when the overall value reaches a certain amount, and if so, what amount would you suggest? 10k maybe?
 
Impossible to say. Sell at whatever point you have made a profit you are satisfied to sell at-everybody will have a different opinion on that issue.
 
Am in a similar position to you - and will sell approx. half my shares and replace with others. However, I already have quite a diversified share investment anyway (via various funds).

Remember that not only the share value, but your job also depend on the success of your company. Best not to keep all your eggs in one basket.
 
euroDilbert said:
Remember that not only the share value, but your job also depend on the success of your company. Best not to keep all your eggs in one basket.
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Whenever I get a chance to exercise stock options I generally sell them immediately on the basis that (a) I don't want to many of my eggs (i.e. job and investments) in one basket (my employer's company) and (b) generally if I was given that amount of cash it would be unlikely that my company's shares would the first that I would run out and buy. Instead I use the money for something immediate or reinvest it elsewhere.
 
Did you purchase the shares in leui of bonus or direct from wages?

If so then I would wait the 3 years needed to avail of reduced tax liability - i.e. only pay Cap gains on the amount instead of Income tax.

So on a rolling basis, assuming you have invested each year for a while, (and the shares are worth the same or more as purchase price) release the amount that has reached 3 years and thus realising an immediate 20/40% from what would have been received 3 years prior.

This amount can then be used to purchase alternative shares - a steady way to build a diversified portfolio.

Paddy
 
paddyodoors said:
If so then I would wait the 3 years needed to avail of reduced tax liability - i.e. only pay Cap gains on the amount instead of Income tax.
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Isn't this only with Revenue approved schemes and many share option/purchase schemes are not Revenue approved so don't qualify for such tax treatment?
 
Not sure but I imagine a large US muliti would be using the ESOP program to allow employees to benefit from tax savings and make them owners rather than offering options- maybe OP can specify.
 
Hi all,
Thanks for the replies.
In my case I actually avail of both shares that are tax-free if held onto for 3 years (from bonuses), aswell as shares bought each month direct from salary (these shares are bought at a few % below market value and can be sold without penalty almost immediately).
I think I shall look at selling most of the second type (if price is right) and check out some of the funds available out there.
 
paddyodoors said:
Not sure but I imagine a large US muliti would be using the ESOP program to allow employees to benefit from tax savings and make them owners rather than offering options- maybe OP can specify.
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I've been a member of a few US multinational and indigenous Irish company ESOP/ESPP schemes and none was Revenue approved so the deferred/preferential tax treatment did not apply. It was always income tax on any difference between discount and exercise price and CGT on any capital gain thereafter with no deferral of the liabilities possible. My understanding is that very few ESOP/ESPP schemes are actually Revenue approved. Not sure about SAYE schemes though or how these differ.
 
ClubMan said:
It was always income tax on any difference between discount and exercise price and CGT on any capital gain thereafter with no deferral of the liabilities possible. My understanding is that very few ESOP/ESPP schemes are actually Revenue approved. Not sure about SAYE schemes though or how these differ.
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Should note the difference between being granted options to purchase shares at a discount or set excercise price and the option of direct purchase of market value shares through payroll.

Revenue site has some info on it - there is a listing of the approved companies - nearly 500 companies. on a quick scan this it seems to include most of the large ones. [broken link removed]

SEE THIS QUOTE FROM REVENUE SITE:

Approved Profit Sharing Scheme (APSS)
Employees or Directors can obtain shares in their Employer Company to the value of €12,700 each year (95/96 et seq) without incurring the normal Schedule E charge provided they hold the shares for 3 years. If the shares are disposed of or transferred to the employee/director within the 3 year period a Schedule E charge arises in the year of sale/transfer on the lower of the market value of the shares when obtained or the sale proceeds.
Dividends received by the employee/director are subject to income tax in the normal way.


CGT


Normal CGT rules apply to disposal of shares. Base cost is set at the date the shares are appropriated to participants.


Paddy
 
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