Hi All,

What is the proper way to reflect/account for unvested restricted stock as it relates to your personal financial tracking and net worth?

Thanks!

It isn't worth anything until it vests.

To take it further, it isn't worth anything until the cash money is in the bank.

That's not quite accurate. When the restricted rights vest, you get actual shares of stock with a clear (market) value.

Those shares of worldcom I am holding were worth oodles around 2000.

Also, the vesting data is when the grant of stock becomes income to you for tax purposes.

So by your rationale we should not count any stocks (or any other investment for that matter) when calculating net worth, because they might be worth 0 at some point in the future? That's just silly. Heck, why even bother counting the value of cash in the bank? It is possible thathat sometime on the future the government will collapse and we'll move to a barter economy without money.

before vesting, RSRs have no value, because you have no rights to the shares. When the rights vest, there is a ascertainable value. Its the market price. You also then have the right to sell the stock or hang onto it. What happens to the market price after that date has no bearing on that fact.

If your employer awards you stock, it is my practice to sell it as soon as you are able - if only from a perspective of avoiding portfolio concentration.

No matter how great the company, if 40-100% of your household income is already dependent on the company, it's a good idea to limit your additional exposure. If you feel very strongly about loyalty and/or upside potential, you could always keep the stock but spend a little additional money to purchase options to hedge your downside.

I once had an employer who matched 401k contributions in company stock. You could rebalance monthly (I think? Or at least quarterly, this was 20 years ago). Same employer sometimes paid bonuses in company stock (with varying vesting periods). I was good about converting any such shares to cash. Some coworkers didn't sell any shares, either 401k matches or outright awards. Sometimes in later years, as the stock climbed (and climbed), I kicked myself a little. But in the end I was very happy with my actions - the company was Lehman Brothers. Obviously most employers' companies don't go bankrupt during the employee's lifetime. But why risk it? Your basis is zero, so you have nothing to lose except the risk.

Actually with Restricted Stock Rights your basis is the market value on the date the shares vest, that value is considered ordinary income to you on that date, and you owe tax on that amount when you file your income tax return the following April. In most cases that I have seen, the employer's program will automatically sell a portion of the shares on the vesting date to pay the tax (withholding) on your behalf.

But I agree with your point about not having all your eggs in one basket.

Fun with taxes! BPGUI is right. What do we always say, 'check with a tax professional'? Sloppy language on my part. In any case, your out-of-pocket expense to acquire these shares is zero

Also, companies have a habit of doing a standard withholding (not using your stated number of exemptions) for these transactions, so it may affect how you want to fill out your tax withholding forms for your regular income in the year of vesting.