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Keep in mind that employees whose RSUs settled on IPO day are taxed at the IPO price, not the price when the lockup period ends.

dannylandau 7y ago
Is that really true? Hard to believe since they are facing potentially millions in taxes!
- foobiekr 7y ago
  It is true and I also find it amazing that the company seemingly did nothing other than withholding 22% (below1M$). It seems like the switch to RSUs did not take into account the downside risk.
  - Balgair 7y ago
    > ... did not take into account the downside risk. Web 2.0 companies in a nutshell
- rockinghigh 7y ago
  It's correct. In the case of Uber, the company withheld shares according to the supplemental wage withholding rules (22%) at the federal level. Employees would still be liable for the extra 10-15% of the IPO price if taxed in the highest tax bracket.
  - bpicolo 7y ago
    > withheld shares according to the supplemental wage withholding rules (22%) at the federal level Is the difference refunded through tax returns?
    - woodrow 7y ago
      Yes, though most Uber employees (and tech company employees in the SF Bay Area in general) are going to be above the 22% bracket, and thus will owe more tax instead of being owed a refund. This is especially likely if the employee is mostly vested and thus settling a large block of RSUs all at once.
AznHisoka 7y ago
What % of employees with stocks would that apply to, in your estimation?
jedberg 7y ago
Since the lockup expires in the same tax year, can't they just sell after the lockup, take the loss, and then use the loss as a write off against the RSU gain so they only pay taxes on the actual realized gain?
- deleted 7y ago
  [deleted]
- woodrow 7y ago
  The initial RSU settlement is taxed as ordinary income. If they sell below the IPO price in future (e.g. to cover their remaining taxes) they'll indeed realize a capital loss but it can only be carried forward against future capital gains from e.g. longer-term holding of UBER or another stock, or using the $3000/year deduction for ordinary income.

dannylandau 7y ago

Is that really true? Hard to believe since they are facing potentially millions in taxes!

foobiekr 7y ago
It is true and I also find it amazing that the company seemingly did nothing other than withholding 22% (below1M$). It seems like the switch to RSUs did not take into account the downside risk.
- Balgair 7y ago
  > ... did not take into account the downside risk. Web 2.0 companies in a nutshell
rockinghigh 7y ago
It's correct. In the case of Uber, the company withheld shares according to the supplemental wage withholding rules (22%) at the federal level. Employees would still be liable for the extra 10-15% of the IPO price if taxed in the highest tax bracket.
- bpicolo 7y ago
  > withheld shares according to the supplemental wage withholding rules (22%) at the federal level Is the difference refunded through tax returns?
  - woodrow 7y ago
    Yes, though most Uber employees (and tech company employees in the SF Bay Area in general) are going to be above the 22% bracket, and thus will owe more tax instead of being owed a refund. This is especially likely if the employee is mostly vested and thus settling a large block of RSUs all at once.

AznHisoka 7y ago

What % of employees with stocks would that apply to, in your estimation?

jedberg 7y ago

Since the lockup expires in the same tax year, can't they just sell after the lockup, take the loss, and then use the loss as a write off against the RSU gain so they only pay taxes on the actual realized gain?

deleted 7y ago
[deleted]
woodrow 7y ago
The initial RSU settlement is taxed as ordinary income. If they sell below the IPO price in future (e.g. to cover their remaining taxes) they'll indeed realize a capital loss but it can only be carried forward against future capital gains from e.g. longer-term holding of UBER or another stock, or using the $3000/year deduction for ordinary income.