the US national has worked and lived in UK for 8 years
he worked for an US company (thro the UK branch) and they granted him shares (in the US stock) in 2002 2003 & 2004, though in some cases they did not vest till later.
these are clearly RCAs and were sold on his departure in 2005.
anyone like to volunteer a suggestion of the tax treatment of these which we are reviewing on appointment, are they taxable on grant on disposal or both
Nicholas Myles
Replies (3)
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US tax
As a US citizen the gain on exercise in 2005?) will have been chargeable to US tax as compensation and reported on the 2005 US tax return.
From what you say it seems likely that these mostly or entirely relate to non-US workdays, so the US tax will be ameliorated by credit for UK tax.
There will also be capital gains tax in the US on any gain between exercise date and sale date.
There may be State tax issues as well depending on the State of residence or State(s) worked from grant to exercise.
Messy maths...
David is right, as usual.
If the shares were acquired through an ISO - Incentive Stock Option - plan, the maths can be extremely tricky on the US side. S/he should seek expert US tax advice from someone familiar with ISO plans.
For all US stock plans (ISO and non-qualified):
They are taxed on the date of exercise.
Disposal can be on the date of exercise or a later date.
Any disposal event will result in a US tax filing obligation. Some exercise events do not trigger US tax filings, others do.
The US tax treatment is relatively simple if the person is not a US citizen, resident, permanent resident, or greencard holder at any point in time between the grant and the eventual sale.
The US tax treatment can be an excruciatingly complicated maths if they were a US citizen, resident, permanent resident, or greencard holder at any point during the period between grant and eventual sale.