Actually, it is true. Stock gains and dividends are taxed at a lower rate than regular income. That's why repulicans love to talk about reducing the capital gains tax. 99% of the population have no clue what they are talking about and the 1% who do love it. Of course, it's always framed as "stimulating investment and spurring the economy".. who would vote against stimulating investment and spurring the economy?.
Stevie did not become a billionaire by being stupid. One of my maxims is to look at what rich people do and try to emulate them (even if you don't know why they doing it). Steve prefers to be paid in stock, then i do too!!.. even if i'm not a tax expert, i know he's not trying to pay more taxes and believe me, he aint in the business of doing favors for apple. If getting paid was cheaper, stevie would get paid. He's not in the charity business.
DON'T forget though that getting paid in stock is one way to keep shareholders happy, because that means your remuneration is directly tied to performance of the stock, so to speak.
For the already-rich, this may not be a big deal but it keeps the common-man shareholder happy somehow, i think. For example, if StevieJ totally f8cked up and Apple stock went to $0 by the end of this year, then Steve's stock which he hasn't sold would be also worth $0
Actually, it is true. Stock gains and dividends are taxed at a lower rate than regular income
No, its not true. I know about the difference between capital gains and dividend rates, but that does not apply here.
When you redeem a company stock option, the difference between your strike price and the current stock price is added to your W2 as income. Company stock options are not taxed like stocks, they are taxed like income.
A bunch of people got in trouble over this at Cisco. They redeemed their stock options, but held the stock instead of cashing it right then. The price of the stock dropped, but at the end of the year they still owed tax on the "income" from when they redeemed the options, but selling the stock did not raise enough money to pay the tax, so they went bankrupt.
dude, how tF did you get up to 7000+ posts? my fuzzy maths says that's average of 50 posts a day since april 2002....
If I remember my AI lore there was a time when it went down and we had to reregister. After that the mods/admins (back when they were cool) were able to restore the post count. So the 7000+ are not all since 2002
No, its not true. I know about the difference between capital gains and dividend rates, but that does not apply here.
When you redeem a company stock option, the difference between your strike price and the current stock price is added to your W2 as income. Company stock options are not taxed like stocks, they are taxed like income.
A bunch of people got in trouble over this at Cisco. They redeemed their stock options, but held the stock instead of cashing it right then. The price of the stock dropped, but at the end of the year they still owed tax on the "income" from when they redeemed the options, but selling the stock did not raise enough money to pay the tax, so they went bankrupt.
First, what the everyday employee gets is different than what Exec get. You are right you pay normal income tax on the different in strike price and sell price if you do a same day sale.
If you buy at some price above strike price and hold for a year then you pay what is call AMT, this works great if the stock is increasing, you hold for a year and pay only a small portion of the gain as income. The gains after the date of purchase is at the capital gains tax rate.
Down side, as you indicated is when the stock goes down. and now you owe AMT and you do not have money to pay for it, or you now have to sell stock at a lose to cover your AMT. You get double screwed if you have to sell stock that you did not have for 1 yr and the tax ball roles forward.
Now for Execs they do not have this problem. Usually there is some deal where the company purchases and holds the stock in the Exec name so at some point in the future 1 yr plus the Exec can sell it and collect the capital gains and only pay capital gains tax.
The other thing Exec can do is buy Stokes on the open market backed solely by the stock options held in their name, kind of like on margin. This is what happen to World Coms CEO (Bernie) when the bottom fell out he had to cover his margin and got World Com to come up with $350 million.
Another popular way Exec are held responsible and compensated, the company requires them to use their own money to buy stock on the open market and hold it, this way they have their own money to lose if the company does bad. However, these deals usually have parachutes attached to them too.
First, what the everyday employee gets is different than what Exec get. You are right you pay normal income tax on the different in strike price and sell price if you do a same day sale.
If you buy at some price above strike price and hold for a year then you pay what is call AMT, this works great if the stock is increasing, you hold for a year and pay only a small portion of the gain as income. The gains after the date of purchase is at the capital gains tax rate.
Down side, as you indicated is when the stock goes down. and now you owe AMT and you do not have money to pay for it, or you now have to sell stock at a lose to cover your AMT. You get double screwed if you have to sell stock that you did not have for 1 yr and the tax ball roles forward.
Now for Execs they do not have this problem. Usually there is some deal where the company purchases and holds the stock in the Exec name so at some point in the future 1 yr plus the Exec can sell it and collect the capital gains and only pay capital gains tax.
The other thing Exec can do is buy Stokes on the open market backed solely by the stock options held in their name, kind of like on margin. This is what happen to World Coms CEO (Bernie) when the bottom fell out he had to cover his margin and got World Com to come up with $350 million.
Another popular way Exec are held responsible and compensated, the company requires them to use their own money to buy stock on the open market and hold it, this way they have their own money to lose if the company does bad. However, these deals usually have parachutes attached to them too.
this is very interesting... can you explain a little more like what exactly is AMT? how does buying stocks backed with an option works? if the company buys the stock for the exec and hold it for 1 yr, and eventually the stock prices decrease, what will happen?
Comments
Originally posted by wnurse
Actually, it is true. Stock gains and dividends are taxed at a lower rate than regular income. That's why repulicans love to talk about reducing the capital gains tax. 99% of the population have no clue what they are talking about and the 1% who do love it. Of course, it's always framed as "stimulating investment and spurring the economy".. who would vote against stimulating investment and spurring the economy?.
Stevie did not become a billionaire by being stupid. One of my maxims is to look at what rich people do and try to emulate them (even if you don't know why they doing it). Steve prefers to be paid in stock, then i do too!!.. even if i'm not a tax expert, i know he's not trying to pay more taxes and believe me, he aint in the business of doing favors for apple. If getting paid was cheaper, stevie would get paid. He's not in the charity business.
DON'T forget though that getting paid in stock is one way to keep shareholders happy, because that means your remuneration is directly tied to performance of the stock, so to speak.
For the already-rich, this may not be a big deal but it keeps the common-man shareholder happy somehow, i think. For example, if StevieJ totally f8cked up and Apple stock went to $0 by the end of this year, then Steve's stock which he hasn't sold would be also worth $0
am i right?
Actually, it is true. Stock gains and dividends are taxed at a lower rate than regular income
No, its not true. I know about the difference between capital gains and dividend rates, but that does not apply here.
When you redeem a company stock option, the difference between your strike price and the current stock price is added to your W2 as income. Company stock options are not taxed like stocks, they are taxed like income.
A bunch of people got in trouble over this at Cisco. They redeemed their stock options, but held the stock instead of cashing it right then. The price of the stock dropped, but at the end of the year they still owed tax on the "income" from when they redeemed the options, but selling the stock did not raise enough money to pay the tax, so they went bankrupt.
Originally posted by sunilraman
dude, how tF did you get up to 7000+ posts? my fuzzy maths says that's average of 50 posts a day since april 2002....
If I remember my AI lore there was a time when it went down and we had to reregister. After that the mods/admins (back when they were cool) were able to restore the post count. So the 7000+ are not all since 2002
Originally posted by e1618978
No, its not true. I know about the difference between capital gains and dividend rates, but that does not apply here.
When you redeem a company stock option, the difference between your strike price and the current stock price is added to your W2 as income. Company stock options are not taxed like stocks, they are taxed like income.
A bunch of people got in trouble over this at Cisco. They redeemed their stock options, but held the stock instead of cashing it right then. The price of the stock dropped, but at the end of the year they still owed tax on the "income" from when they redeemed the options, but selling the stock did not raise enough money to pay the tax, so they went bankrupt.
First, what the everyday employee gets is different than what Exec get. You are right you pay normal income tax on the different in strike price and sell price if you do a same day sale.
If you buy at some price above strike price and hold for a year then you pay what is call AMT, this works great if the stock is increasing, you hold for a year and pay only a small portion of the gain as income. The gains after the date of purchase is at the capital gains tax rate.
Down side, as you indicated is when the stock goes down. and now you owe AMT and you do not have money to pay for it, or you now have to sell stock at a lose to cover your AMT. You get double screwed if you have to sell stock that you did not have for 1 yr and the tax ball roles forward.
Now for Execs they do not have this problem. Usually there is some deal where the company purchases and holds the stock in the Exec name so at some point in the future 1 yr plus the Exec can sell it and collect the capital gains and only pay capital gains tax.
The other thing Exec can do is buy Stokes on the open market backed solely by the stock options held in their name, kind of like on margin. This is what happen to World Coms CEO (Bernie) when the bottom fell out he had to cover his margin and got World Com to come up with $350 million.
Another popular way Exec are held responsible and compensated, the company requires them to use their own money to buy stock on the open market and hold it, this way they have their own money to lose if the company does bad. However, these deals usually have parachutes attached to them too.
Originally posted by Maestro64
First, what the everyday employee gets is different than what Exec get. You are right you pay normal income tax on the different in strike price and sell price if you do a same day sale.
If you buy at some price above strike price and hold for a year then you pay what is call AMT, this works great if the stock is increasing, you hold for a year and pay only a small portion of the gain as income. The gains after the date of purchase is at the capital gains tax rate.
Down side, as you indicated is when the stock goes down. and now you owe AMT and you do not have money to pay for it, or you now have to sell stock at a lose to cover your AMT. You get double screwed if you have to sell stock that you did not have for 1 yr and the tax ball roles forward.
Now for Execs they do not have this problem. Usually there is some deal where the company purchases and holds the stock in the Exec name so at some point in the future 1 yr plus the Exec can sell it and collect the capital gains and only pay capital gains tax.
The other thing Exec can do is buy Stokes on the open market backed solely by the stock options held in their name, kind of like on margin. This is what happen to World Coms CEO (Bernie) when the bottom fell out he had to cover his margin and got World Com to come up with $350 million.
Another popular way Exec are held responsible and compensated, the company requires them to use their own money to buy stock on the open market and hold it, this way they have their own money to lose if the company does bad. However, these deals usually have parachutes attached to them too.
this is very interesting... can you explain a little more like what exactly is AMT? how does buying stocks backed with an option works? if the company buys the stock for the exec and hold it for 1 yr, and eventually the stock prices decrease, what will happen?