Restricted Stock and Restricted Stock Units - Snapshot

There are many forms of equity compensation. Restricted Stock and Restricted Stock Units are one of the many ways of rewarding the employees. Restricted stock and restricted stock unit (RSU) awards, alternatives to stock options, are an increasingly popular form of employee compensation.

Reproduced below is a snapshot of the same:

Restricted  Stock	Restricted  Stock Unit
Actual stock issued at grant, subject to vesting restrictions	A unit has value equivalent to one share of common stock, but no shares are issued at time of grant
Upon issuance, stock typically held in escrow, custodial, book entry or electronic accounts until vested	At release the units are converted into common stock
Stock released to employees at vest	Shares are issued at release — providing opportunity to defer income taxation by deferring the release date and receipt of the underlying stock
Typically entitled to voting and dividend rights	No voting rights, No dividends, but company may elect to pay dividend Equivalents
Eligible for Section 83(b) elections	Not eligible for Section 83(b) election

Comparison of tax treatment of Restricted Stock to Units

Event	Restricted  Stock	Restricted  Stock Unit
Grant	Not taxable at grant unless Section 83(b) election is filed	A unit has value equivalent to one share of common stock, but no shares are issued at time of grant
Vest	Income and FICA taxation on current value	FIC A taxation on current value
Release	No taxable income	Income taxation on current value
Sale	Capital gain/loss	Capital gain/loss