Delaying taxes with stock option exercises and restricted stock vesting

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With options and restricted stock, attempts to delay taxes beyond the exercise date (or vesting with restricted stock/RSUs) usually fail. Read about the latest try that seemed logical, but rejected by court in new case. http://fb.me/12liyMcRd

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Dear Bruce:


Trying to interpret that 9th Circuit decision in Strom v. United States of America is a difficult task.


Strom argued that the vesting date should be the purchase date for Section 16b suits and that Strom could un-frivilously be sued under 16b during the 6 month period after the vesting if she sold her stock. The 9th Circuit says that the deciding factor is that the ESOs' grant date is considered the purchase date and not the vesting date. Therefore the 9th Circuit ruled that the at risk periods for a suit under 16b expired six months after the grants.


However, both the plaintiffs and the 9th Circuit forget about the fact that the 6 month period of Section 16 b applies to purchases during a 6 month period prior to a sale and a 6 month period after the sale. I think the decision is incorrect because if Strom sold her shares and paid her taxes and then bought the shares back much lower during a six month period after the sale, she would be subject to a private right of action under 16b for return of the profits back to the company .


Does anyone question that Section 16b would require return of profits if Strom bought back the shares at 40, which she sold at 200, during a period of 6 months after the sale?


John Olagues

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Bruce Brumberg
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