2021 GESPP Results Breakdown

Full Transcript:

The Shell employee stock purchase plan finally had a good year. Now let’s talk about what that means for you.

First, let’s start with the basics. In 2021, You could have contributed up to $6,980 into the Shell GESPP program. You then get a 15% discount on the closing price at the beginning of 2021or the first trading day of the New Year. In this case, as the stock is now higher, you get 15% off of $36.03, meaning your purchase price is $30.63 per share.

If you maxed out your contributions at $6,980 you will have 227 shares at $30.63 per share. Now you have an immediate gain of $3,180 as you have 227 shares, but the current market value is $44.64. It’s very common for people to believe that this is a capital gain, but unfortunately, that is not the case. The IRS considers this income and therefore Shell reports this income and withholds shares for you. The amount of shares they withhold depends on your personal tax situation. For this illustration, let’s just assume that they withhold 25 shares for taxes. That means you’re left with 202 shares at $44.64 per share. Still a really good after-tax gain.

Now there are two important considerations that you need to make. One, you need to understand that this $44.64 is your cost basis. That’s really important because that is the amount that you already paid taxes on. Fidelity does not track this cost basis, so it does not end up on your year-end tax forms. If you do not manually enter this into your tax return, you may be overpaying the IRS.

Second, you need to decide what to do with the approximately $9,000 in Shell stock that you now have in your Fidelity account. You can either keep it or sell it. When doing this as your cost basis is close to the current market value, taxes should not be the primary driver in you determining whether or not to keep or sell the stock. Instead, ask yourself two questions

How does this stock fit into my financial plan and investment strategy?

And if I didn’t already own this stock, would I go out today and buy $9,000 worth of stock?

The way you answer those questions should help you determine whether or not you want to keep this stock.

I hope you found this video helpful, and I hope you share it with your coworkers to help them out as well.