Release Administration

Stock options that are exercised before they are vested are commonly called restricted shares and are typically held in escrow until they vest. As the shares vest, they are released to the optionee. You must record the number of shares released and the taxes due from the optionee, release the shares from escrow, and deliver them according to the optionee's instructions. Ordinary income and taxes are generally calculated and collected at the time of release unless the optionee filed an 83(b) election at the time of exercise.

If your stock plans include restricted stock awards, or the plans allow exercise before vesting, you periodically release restricted shares.

The process of releasing restricted shares is similar to that of exercising options. You identify the releasable shares, the release method, and the issuance instructions. Depending on the optionee's 83(b) election, you calculate ordinary income and collect taxes.