Gemifi helps financial advisors manage three types of equity compensation for their clients: Restricted Stock Units (RSUs), Incentive Stock Options (ISOs), and Non-Qualified Stock Options (NQOs). Each type has different tax treatment, exercise rules, and planning considerations.
Restricted Stock Units (RSUs)
RSUs are the simplest form of equity compensation. Shares are granted and vest on a schedule — no purchase or exercise is required.
No strike price or expiration date — shares are delivered automatically at vesting
Tax at vesting — the fair market value on the vest date is taxed as ordinary income
Withholding — tax withholding is automatically calculated and deducted (default 32%, configurable per client)
Capital gains — if shares are held after vesting, gains are short-term (held ≤1 year) or long-term (held >1 year from vest date)
In Gemifi, RSU vests are tracked with vest codes (V1, V2, etc.) and sales are allocated to specific vest lots for accurate capital gains reporting.
Incentive Stock Options (ISOs)
ISOs offer potential preferential tax treatment but come with strict holding period requirements.
Strike price required — the employee pays the strike price to exercise
Expiration date — options must be exercised before they expire
Qualified disposition — to receive long-term capital gains treatment, the employee must hold shares for both:
2 years from the grant date, AND
1 year from the exercise date
Disqualifying disposition — if either holding period is not met, the bargain element (FMV at exercise minus strike price) is taxed as ordinary income
AMT consideration — the bargain element is included in Alternative Minimum Tax calculations in the year of exercise
Non-Qualified Stock Options (NQOs)
NQOs are more flexible than ISOs with simpler (though less favorable) tax treatment.
Strike price required — the employee pays the strike price to exercise
Expiration date — options must be exercised before they expire
Tax at exercise — the bargain element is always taxed as ordinary income, plus withholding tax
No holding period requirements — shares can be sold immediately after exercise
Capital gains after exercise — any gain or loss from the exercise-date FMV is short-term or long-term based on the standard 1-year holding period
Key Concepts
Bargain Element — The spread between fair market value and strike price at exercise. Taxed as ordinary income for NQOs; potentially for ISOs if disqualified.
Vest Date — When shares or options become available. For RSUs, this triggers a taxable event.
Qualified vs. Disqualified — Whether an ISO sale meets the required holding periods for preferential tax treatment.
Cost Basis — The per-share cost used to calculate capital gains. Varies by equity type and exercise/vest price.
How Gemifi Helps
Gemifi tracks every action across your client's equity grants — from initial grant through vesting, exercise, and sale. The platform:
Calculates tax implications for each scenario
Builds optimized trading plans comparing different exercise and sale strategies
Tracks qualified vs. disqualified ISO dispositions automatically
Allocates sales to specific vest/exercise lots for accurate capital gains reporting
Monitors cash flow impact and tax withholding across all equity types
Need More Help?
If you have questions about a specific equity type or how to set up a trading plan, reach out to us and we'll walk you through it.