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Reading the linked article about how employees of Good paid huge tax bills on stock that ultimately proved worthless - how insane is US tax law?? Surely you sho

by retube 11y ago

Reading the linked article about how employees of Good paid huge tax bills on stock that ultimately proved worthless - how insane is US tax law?? Surely you should only be taxed on realised gains, i.e when you cash out.

mahyarm 11y ago
You get taxed at the amount of 'profit' you have gained when you exercise the option. There is an 'ISO' stock option type for employees that makes the tax event when you actually cash out, but an alternative tax system called 'AMT' (alternative minimum tax) kicks in pretty quickly and taxes you anyway. The entire system assumes you are getting public company stock or something similarly liquid and taxes you as so. Capital losses cannot be applied to normal income in practice in the US either, only to other capital gains.
- adventured 11y ago
  > Capital losses cannot be applied to normal income in practice in the US either, only to other capital gains. That's wrong. You can deduct $3,000 per year in capital losses against normal income. "Generally, realized capital losses are first offset against realized capital gains. Any excess losses can be deducted against ordinary income up to $3,000 ($1,500 if married filing separately) on line 13 of Form 1040. Losses in excess of this limit can be carried forward to later years to reduce capital gains or ordinary income until the balance of these losses is used up." https://www.irs.gov/uac/IRS-Reminds-Taxpayers-They-Can-Use-Stock-Losses-to-Reduce-Taxes https://www.irs.gov/uac/IRS-Reminds-Taxpayers-They-Can-Use-S...
  - mahyarm 11y ago
    That is why I said in practice. You just had a $50k loss from your startup option tax bill? It's going to take 17 years before you can deduct all of that loss from your normal income! $150k loss? 50 years!! In other countries, capital loss can be deducted from your normal income immediately.
    - smileysteve 11y ago
      > You just had a $50k loss from your startup option tax bill? It's going to take 17 years before you can deduct all of that loss Unless your next startup options (or Google/Big Co RSUS) have a 50k gain the next year(s). Then it only takes year(s). Or if you have diversified and have market investments that likewise increase 50k and then you sell them.
  - seattle_spring 11y ago
    AMT is not capital losses. You can apply your AMT credits to their full amount every year until the difference is leveled off. While the AMT amount may be so high that a lifetime never hits equilibrium, people citing the $3000 capital loss deduction are talking about a completely different thing.

by retube 11y ago

mahyarm 11y ago

You get taxed at the amount of 'profit' you have gained when you exercise the option. There is an 'ISO' stock option type for employees that makes the tax event when you actually cash out, but an alternative tax system called 'AMT' (alternative minimum tax) kicks in pretty quickly and taxes you anyway. The entire system assumes you are getting public company stock or something similarly liquid and taxes you as so. Capital losses cannot be applied to normal income in practice in the US either, only to other capital gains.

adventured 11y ago
> Capital losses cannot be applied to normal income in practice in the US either, only to other capital gains. That's wrong. You can deduct $3,000 per year in capital losses against normal income. "Generally, realized capital losses are first offset against realized capital gains. Any excess losses can be deducted against ordinary income up to $3,000 ($1,500 if married filing separately) on line 13 of Form 1040. Losses in excess of this limit can be carried forward to later years to reduce capital gains or ordinary income until the balance of these losses is used up." https://www.irs.gov/uac/IRS-Reminds-Taxpayers-They-Can-Use-Stock-Losses-to-Reduce-Taxes https://www.irs.gov/uac/IRS-Reminds-Taxpayers-They-Can-Use-S...
- mahyarm 11y ago
  That is why I said in practice. You just had a $50k loss from your startup option tax bill? It's going to take 17 years before you can deduct all of that loss from your normal income! $150k loss? 50 years!! In other countries, capital loss can be deducted from your normal income immediately.
  - smileysteve 11y ago
    > You just had a $50k loss from your startup option tax bill? It's going to take 17 years before you can deduct all of that loss Unless your next startup options (or Google/Big Co RSUS) have a 50k gain the next year(s). Then it only takes year(s). Or if you have diversified and have market investments that likewise increase 50k and then you sell them.
- seattle_spring 11y ago
  AMT is not capital losses. You can apply your AMT credits to their full amount every year until the difference is leveled off. While the AMT amount may be so high that a lifetime never hits equilibrium, people citing the $3000 capital loss deduction are talking about a completely different thing.