Year End Moves for Corporate Executives with a Concentrated Position in Company Stock

Dan Seder: Welcome. My name is Dan Seder, and I'm Managing Director here at Blue Chip Partners. If you're a corporate executive with a concentrated position in company stock, here's a compelling reason to consider diversifying a portion of those shares prior to year-end. If you're a corporate executive, avoid this mistake in 2022.

First, know your block cost basis in equity awards that have previously vested. So, block cost basis refers to the blocks of shares that vested previously at different points in time. And the reason you want to understand the cost basis is some of those vested shares could be trading today at a loss. For example, we do a lot of work with executives at Johnson Controls. Their restricted stock units vested last year in December at around $79 per share. Today, Johnson Controls trades around $68 per share. So, it offers a unique opportunity for executives that hold those vested shares to then harvest those losses in that particular block prior to year-end.

And if they harvest those losses, they can do a couple of things. One, offset capital gains with losses. Secondly, to the extent that they have net losses, they can take up to $3,000 as a deduction against ordinary income. And thirdly, any remaining losses get carried forward into 2023. So, if you find yourself in this position, don't let this opportunity pass you by.

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