Restricted Stock Units (RSUs) represent a promise of company shares granted to employees. When these shares vest, they become the employee’s property, and the fair market value of the stock at that time establishes the cost basis. This value is crucial for determining capital gains or losses when the shares are eventually sold. For example, if 100 RSUs vest when the stock price is $50, the cost basis is $5,000. If the employee later sells those shares for $60 each, the capital gain is calculated based on the $50 cost basis.
Understanding this initial valuation is fundamental for tax planning and financial record-keeping. It serves as the foundation for calculating tax liabilities upon the sale of the vested shares and allows individuals to accurately assess the profitability of their equity compensation. Historically, accurately tracking and managing equity compensation was complex, but modern brokerage platforms and tax software have simplified this process considerably.
