Managing Your Highly Appreciated Walmart Stock

Many Walmart and Sam's Club associates receive Walmart stock as part of their compensation via the Associate Stock Purchase Plan, Restricted Stock Units (RSUs) and Performance Share Units (PSUs).

With the Walmart stock price significantly increasing over the last several years, many Walmart associates may hold a large amount of Walmart stock with significant capital gains tax implications.

While this is not the worst issue to have, as it has created a lot of wealth, it does create complexity. Here are three ways to manage your highly appreciated Walmart stock position.

1.) Do Nothing and Grow Your Walmart Stock Position

The path of least resistance is to continue holding your Walmart Shares allowing the position to grow as you receive more shares in your Fidelity account for RSUs and PSUs, and at Computershare for the ASPP.

The benefit is that by not selling, you'll continue to defer capital gains tax on the appreciated shares.

The disadvantage is that you may have an overconcentrated position in a single stock. This is the "You don't want all your eggs in one basket" perspective.

Yes, Walmart is a successful company with a high performing stock, but a portfolio consisting of hundreds of stocks limits single stock risk and provides investment exposure to other areas of the economy.

2.) Sell Your Walmart Stock and Diversify

The general textbook approach to managing company stock is to immediately sell at vesting and reinvest the proceeds in a diversified portfolio of stocks across various sectors and countries.

However, if you have significant capital gains, selling all the Walmart stock at once may not be the best option.

By selectively selling WMT shares with the lowest embedded tax - those shares with a High Cost Basis and Long-Term Holding status - it is possible to gradually reduce the concentrated position while minimizing the tax consequences.

Holding a concentrated position in a stable company like Walmart can be fine, but it's essential to limit the potential impact of a single stock's performance on your quality of life and financial goals.

Tip: The Fidelity Statement shows the aggregate cost basis for each position, but you'll need to login to Fidelity to view the cost basis for each tax lot and identify which tax lots to sell. If you'd like assistance selecting and selling tax lots of WMT shares in a tax-efficient way, feel free to reply to this email or grab some time on my calendar.

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3.) Give Away Your Walmart Stock

Many charities accept stock donations. If charitable giving is part of your financial plan, donating highly appreciated stock is a tax-efficient way to give.

The charity receives the full market value of the shares, and you can deduct this amount on your tax return. In contrast, if you sold the shares and donated the cash, you would have to pay capital gains tax, leaving less resources for the charity and/or a higher tax bill.

Tip: A Donor Advised Fund (DAF) allows donors to deduct several years of donations in a single tax year. This is beneficial for those in a high tax bracket with a large amount of highly appreciated stock. If you'd like assistance evaluating if donating stock is right for you, feel free to reply to this email or grab some time on my calendar.

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Another option is to hold the shares with the intention of passing them on to your heirs. At the time of the owner's passing, the cost basis of the shares is adjusted to equal the market value (i.e. step-up in basis), eliminating the previous unrealized capital gains tax.

Wrap-Up

Managing Walmart Stock is a key component to a Walmart Leader's financial plan. It involves managing investment risk, planning for taxes and administering the trades. If you have any questions, feel free to reach out. We are happy to help.

Thanks for reading,

Mark Chisenhall, CFA, MBA

Taurus Financial Planning is a Fee-Only Wealth Management firm based in Bentonville, AR. The firm offers comprehensive financial planning, tax planning and investment management to corporate executives across the country.

Taurus Financial Planning is a Registered Investment Advisor with the State of Arkansas. This information is provided as a guide to assist you in your financial planning. The specific examples are provided for illustration purposes only and are not representative of specific investments or guarantees of future returns. Please consult with a professional for specific questions regarding your particular situation. If there is any error or inconsistency between this document and the official company plan documents, your company plan documents will govern.

This publication is for informational purposes only and is not intended as tax, accounting or legal advice or as an offer or solicitation of an offer to buy or sell or as an endorsement of any company security fund or other securities or non securities offering. This publication should not be relied upon as the sole factor in an investment making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made by the Author, in the future, will be profitable or equal the performance noted in this publication.