5 ms·

> I would say "sure this stock is 'worth' $500K but if I sell it I'm going to have to pay a huge amount of tax on How is that possible? After 1 year, you are i

by gohrt 10y ago

> I would say "sure this stock is 'worth' $500K but if I sell it I'm going to have to pay a huge amount of tax on How is that possible? After 1 year, you are in Long-term capital gains territory, so selling now vs later is tax neutral (except for gains on gains, but that's rather minor unless you think you are in a growth stock) The only reason to delay selling for tax reasons is if you also have a high income (over $300K?) that boosts your Long-term capital gains rate

muzz 10y ago
The higher long-term capital gains rate is a recent addition to the tax code starting in 2013. During the dot-com bubble, long-term capital gains rates were essentially the same for most brackets (only the absolute lowest bracket had a lower rate)
bgentry 10y ago
With options (at least ISOs), you don't qualify for the long-term capital gains rate until you've held the shares for at least a year after exercise AND waited at least two years from the grant date to sell them. It's possible that the second requirement is what affected ChuckMcM.
swolchok 10y ago
> The only reason to delay selling for tax reasons What about if you live in a state with high income tax and no capital gains relief from said rate, and you think that maybe at some point in the future you might leave that state for one with a lower income tax? For example, moving from California to anywhere else.
ChuckMcM 10y ago
As others have mentioned, taxes are vary from jurisdiction to jurisdiction. I was fortunate (or not :-)) to have a mother in law who was both a CPA and ran a tax business. In my case I got to consult with her on a variety of "what if I did ..." scenarios. In the case of my Sun stock it was clear of the option restrictions but having been acquired (remember that $10M+ of "future" wealth?) I had a pretty incredible "income" on paper. But really it was all about restricted stock (as part of the acquisition) and 89b elections etc. Anyway, the meta question of whether or not to pay off my house was real (my mother in law advised against, after all you get the mortgage deduction). The endowment question is also good and I find myself in the Vancouver situation in a house that I probably wouldn't spend as much as its "worth" to live in it. Future risk/reward never goes away.

by gohrt 10y ago

muzz 10y ago

The higher long-term capital gains rate is a recent addition to the tax code starting in 2013. During the dot-com bubble, long-term capital gains rates were essentially the same for most brackets (only the absolute lowest bracket had a lower rate)

bgentry 10y ago

With options (at least ISOs), you don't qualify for the long-term capital gains rate until you've held the shares for at least a year after exercise AND waited at least two years from the grant date to sell them. It's possible that the second requirement is what affected ChuckMcM.

swolchok 10y ago

> The only reason to delay selling for tax reasons What about if you live in a state with high income tax and no capital gains relief from said rate, and you think that maybe at some point in the future you might leave that state for one with a lower income tax? For example, moving from California to anywhere else.

ChuckMcM 10y ago

As others have mentioned, taxes are vary from jurisdiction to jurisdiction. I was fortunate (or not :-)) to have a mother in law who was both a CPA and ran a tax business. In my case I got to consult with her on a variety of "what if I did ..." scenarios. In the case of my Sun stock it was clear of the option restrictions but having been acquired (remember that $10M+ of "future" wealth?) I had a pretty incredible "income" on paper. But really it was all about restricted stock (as part of the acquisition) and 89b elections etc. Anyway, the meta question of whether or not to pay off my house was real (my mother in law advised against, after all you get the mortgage deduction). The endowment question is also good and I find myself in the Vancouver situation in a house that I probably wouldn't spend as much as its "worth" to live in it. Future risk/reward never goes away.