The illegal act of buying or selling a company’s stock based on confidential information you possess. For example, if you’re aware your company is about to announce a major setback or advance that is likely to affect its share price, it would be illegal to sell your shares before the news has been made public.
When a company completes its initial public offering, it transitions from being a privately held firm, typically owned by one person or a few individuals, to being a public company, owned by all its shareholders.
Among available stock options, ISOs are often the most tax-advantaged, but potentially complicated options to manage, especially since they entail planning for alternative minimum tax (AMT) and AMT credit, and qualified/disqualified sales. They also typically require you to have cash available to purchase stock when you exercise your options. Describing availability, vesting schedules, tax treatments, maximum grants, 83(b) eligibility, termination agreements, and detailed cash flow considerations is beyond the scope of this glossary.
When donating the value of shares you own in company stock, you can sell the shares and donate the cash. Or you can transfer the shares “in-kind,” without selling them. If you donate low-basis, in-kind stock from a taxable account to a Donor Advised Fund or other qualified charity, neither you nor your recipients are subject to capital gains taxes on the appreciated stock. If you instead sell the shares and donate the cash, the gains become taxable income in the year of the sale.
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