7 ms·

It's not a loophole, it's a specific tax break for people cashing out of "small" businesses. ("small" means at the time you joined -- it can have grown huge sin

by tlb 7y ago

It's not a loophole, it's a specific tax break for people cashing out of "small" businesses. ("small" means at the time you joined -- it can have grown huge since.) QSBS can save you a lot, but it can be a lot of work to file too. I ran up about $20k in accountant bills doing it on a complex deal. If you're selling founder or early-employee stock, ask your accountant if QSBS is right for you.

outericky 7y ago
Seriously... not a loophole. Explicit tax rule. Just making it look like people are somehow taking advantage of the system. FUD.
- walshemj 7y ago
  To modify an older UK saying "nothing so sanctimonious as a newspaper journalist" The original is about a certain police force and was by Winston Churchill
dang 7y ago
Ok, we've replaced 'loophole' with the name of the thing above.
- asr 7y ago
  The New York Times headline uses the word “loophole.” It’s not appropriate to rewrite that headline simply because you don’t like it. If “loophole” were an incorrect choice of words it would not be in the headline. EDIT to add I understand moderation is a thankless job and thank you for doing it. But I disagree with this particular call.
  - dang 7y ago
    HN title moderation is more consistent than it may appear. It all follows from the guideline: "Please use the original title, unless it is misleading or linkbait; don't editorialize." (https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html) Submissions should stick to the original title—submitting an article doesn't confer the right to change it to suit one's opinion. But we make exceptions for misleading titles and linkbait. Given how the internet and media work, we often have to change titles for one or both of those reasons. When we do, we look for a representative phrase from the article itself that can work as an accurate and neutral title. We only ever make up our own titles as a last resort, which is rare, maybe once a week if that. Sticking to the article's language often ends up being truer to the article than its own headline, because those are often not the author's doing. For example the current NYT article does not say "loophole"; only the headline does. The word the article uses is "provision" and it uses it four times. Presumably the headline writer switched "provision" to "loophole" for obvious reasons: it makes the title more provocative and thus more attention-getting. Normally we'd switch it back, but in this case I ran into HN's 80 char limit, so I squeezed "rule" in instead. When users start objecting to a title in the comments, we usually acknowledge the objection and apply it to the title: https://hn.algolia.com/?sort=byDate&dateRange=all&type=comment&storyText=false&prefix=false&page=0&query=by:dang%20ok%20above https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme.... HN readers have an eagle eye for inaccuracy, so their objections are usually fair. More importantly though, if we don't do it, the thread will increasingly be about how irritating people find the title. By translating their objection into a concrete edit, we ground out that energy. People feel heard, and the thread can go back to discussing the article itself, which is always more interesting. Never underestimate the passion users feel about titles. It is a force of nature—I call it 'title fever': https://hn.algolia.com/?sort=byDate&dateRange=all&type=comment&storyText=false&prefix=false&page=0&query=by:dang%20%22title%20fever%22 https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme.... You cannot fight it, only yield: https://news.ycombinator.com/item?id=17496011 https://news.ycombinator.com/item?id=17496011. When I started this job, I found that perplexing: why care so much about titles? How is this the most important thing? But I've come to understand it better. Titles are the one thing everybody reads, so they're the one thing we all have in common. It sounds trivial, but they're the most public, most shared space the community has, and so carry the strongest charge. Thousands of lasers are focused on them. They're also small enough that it's possible to understand them and to feel like one can get them right—at least in comparison to anything else. The community's passion for correctness, so frustrated in most other places, ends up pouring into this. This creates a strongly reinforcing loop on HN's front page. The feeling of HN titles being accurate and neutral—"I want it to be bookish" was what PG originally told me—gets compounded and cements into an expectation that things must be that way. If they're not, strong frustration exerts pressure to make it that way. This is what I mean by force of nature. And when readers see that they actually have influence over this place, like when people object to a title and we change it, they bond with it more closely and the loop gets stronger. It also gets stronger because of the contrast between HN and other places on the internet, which have to play games to get clicks that we are blessed with not having to play: https://hn.algolia.com/?sort=byDate&dateRange=all&type=comment&storyText=false&prefix=false&page=0&query=by:dang%20yc%20hn%20valuable https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme.... The brain works in contrasts, and the contrast between the neutral HN style and most other places is so sharp that it creates an "ow my eyes" effect going one way and an "ahh" feeling of relief going the other. HN being text-based affects that too: no garish images, no flashing lights, no loud videos. The more often people come here, the more such small contrasts get registered—thousands of them. We're all conditioned now to expect HN's front page to be this way. Coming here should feel like walking into a library. It's an interesting question what all this emotion that people feel about HN titles, the HN frontpage, and HN itself is really related to. It's far too strong to only be about HN, which is merely an internet forum and basically just an entertainment site.
    - thunderbong 7y ago
      Dang, I think you've summarised the difference between news and 'news' in three paragraphs wonderfully. Everyone keeps saying that moderation is a thankless job and I thank you out for it. But I'd like to take this chance to thank you for the insights that you post. They give me an amazing insight to this teeming mass called humanity and help me see the 'humane' part of it despite everything to the contrary.
    - rayiner 7y ago
      In an age of click bait, HN’s title moderation is really fantastic and measured. Thank you.
    - ericd 7y ago
      Excellent points, and excellent work moderating, thanks for all you do. I think the point about the headlines being the one thing everyone reads is especially important for everyone to realize, and I wish the people coming up with titles would realize and take seriously the huge responsibility they have, not just for the number of clicks they garner, but also the fact that very often people read that as the summary and internalize it as fact. Every time the writers stretch the truth to get more clicks, they’re doing slight harm to huge numbers of people. Thanks for keeping this corner of the internet a bit cleaner of that.
      - dang 7y ago
        The problem is systemic. Those tricks work in the short term, forcing everyone to use them. The long term costs are externalities. HN is in a special position, maybe even a unique one. If it were a standalone business we'd have to optimize for traffic, not curiosity. It's only because HN is part of YC that it can be HN.
        ericd 7y ago
        You’re right, I just hope they feel some shame as they do it. I’d hoped that trying to maintain their brand would have kept NYT from this, but it seems like no one is immune.
  - thaumasiotes 7y ago
    > If “loophole” were an incorrect choice of words it would not be in the headline. Wow, that's... generous.
    - asr 7y ago
      “Correct” here was not supposed to mean you must agree. As others have pointed out “loophole” is often in the eye of the beholder. But I mean to say that it’s not inaccurate to use the word loophole in such a way that a mod should change the title.
  - deleted 7y ago
    [deleted]
  - TuringNYC 7y ago
    Actually learning that the NYTimes calls this a “loophole” is much of the story for me — it is part of a growing anti-tech worker rhetoric. It is part of a similar narrative that tries to justify breaking up tech firms but conveniently ignores telco, pharma, insurance, etc.
Finnucane 7y ago
Loophole doesn’t have a strict definition. Almost any deduction could be a loophole. Usually it is referring to anything that helps people with high incomes avoid paying taxes.
- kaycebasques 7y ago
  The definition is very straightforward. It’s a loophole when others do it, especially those I don’t like, but it’s a tax break when I do it.
  - Finnucane 7y ago
    True, and if poor people could hire lobbyists and tax attorneys, they’d get more loopholes too.
    - zaroth 7y ago
      Progressive tax rates, the doubled standard deduction, child tax credit, EITC, and Medicaid expansion are all pretty sweet “loopholes” for those on the lower end of the AGI spectrum.
      - thepangolino 7y ago
        For me a loophole is something that requires a certain amount of work to benefit from. Much more than ticking in a box in a standard form.
        zaroth 7y ago
        For what it’s worth, QSBS is just a matter of filling in the dollar amount and writing “Section 1202 exclusion”. To me a loophole is something where you have to perform some sort of otherwise unnecessary accounting procedure in order to qualify. For example, forming an S Corp to funnel contracting income through, solely for the purpose of avoiding the 3.8% payroll surtax.
ForHackernews 7y ago
It does seem like taking the piss for a multimillion dollar startup to qualify as a "small business". Just because you're staying within the letter of the law doesn't mean it's not a loophole -- arguably that's exactly what a loophole is. According to the article, professional accountants consider this scheme dubious.
- walshemj 7y ago
  You know startups start you know start small Apples initial seed capital was a few thousands I believe. The UK has something similar for small companies the EMI share schemes - all of the employees where I work have these options.
zaroth 7y ago
> QSBS can save you a lot, but it can be a lot of work to file too. I ran up about $20k in accountant bills doing it on a complex deal. I don’t understand this. You just claim it on the Schedule D. As far as I know, you don’t file any documentation at the time of the tax return, you simply attest that it qualifies.
bradleyjg 7y ago
Okay, let's call it a tax expenditure instead. What public interest is this expenditure advancing and how efficiently is it advancing that interest as compared to alternative expenditures?
- betterunix2 7y ago
  It incentivizes investments in small businesses, which generally have trouble attracting investors because of the high risk of failure. In general we want people to take risks and start new businesses to maintain a healthy and competitive market. That employees who are paid in stock also benefit is a good thing, because in addition to capital investments a startup also requires talented workers to help get off the ground.

by tlb 7y ago

outericky 7y ago

Seriously... not a loophole. Explicit tax rule. Just making it look like people are somehow taking advantage of the system. FUD.

walshemj 7y ago
To modify an older UK saying "nothing so sanctimonious as a newspaper journalist" The original is about a certain police force and was by Winston Churchill

dang 7y ago

Ok, we've replaced 'loophole' with the name of the thing above.

asr 7y ago
The New York Times headline uses the word “loophole.” It’s not appropriate to rewrite that headline simply because you don’t like it. If “loophole” were an incorrect choice of words it would not be in the headline. EDIT to add I understand moderation is a thankless job and thank you for doing it. But I disagree with this particular call.
- dang 7y ago
  HN title moderation is more consistent than it may appear. It all follows from the guideline: "Please use the original title, unless it is misleading or linkbait; don't editorialize." (https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html) Submissions should stick to the original title—submitting an article doesn't confer the right to change it to suit one's opinion. But we make exceptions for misleading titles and linkbait. Given how the internet and media work, we often have to change titles for one or both of those reasons. When we do, we look for a representative phrase from the article itself that can work as an accurate and neutral title. We only ever make up our own titles as a last resort, which is rare, maybe once a week if that. Sticking to the article's language often ends up being truer to the article than its own headline, because those are often not the author's doing. For example the current NYT article does not say "loophole"; only the headline does. The word the article uses is "provision" and it uses it four times. Presumably the headline writer switched "provision" to "loophole" for obvious reasons: it makes the title more provocative and thus more attention-getting. Normally we'd switch it back, but in this case I ran into HN's 80 char limit, so I squeezed "rule" in instead. When users start objecting to a title in the comments, we usually acknowledge the objection and apply it to the title: https://hn.algolia.com/?sort=byDate&dateRange=all&type=comment&storyText=false&prefix=false&page=0&query=by:dang%20ok%20above https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme.... HN readers have an eagle eye for inaccuracy, so their objections are usually fair. More importantly though, if we don't do it, the thread will increasingly be about how irritating people find the title. By translating their objection into a concrete edit, we ground out that energy. People feel heard, and the thread can go back to discussing the article itself, which is always more interesting. Never underestimate the passion users feel about titles. It is a force of nature—I call it 'title fever': https://hn.algolia.com/?sort=byDate&dateRange=all&type=comment&storyText=false&prefix=false&page=0&query=by:dang%20%22title%20fever%22 https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme.... You cannot fight it, only yield: https://news.ycombinator.com/item?id=17496011 https://news.ycombinator.com/item?id=17496011. When I started this job, I found that perplexing: why care so much about titles? How is this the most important thing? But I've come to understand it better. Titles are the one thing everybody reads, so they're the one thing we all have in common. It sounds trivial, but they're the most public, most shared space the community has, and so carry the strongest charge. Thousands of lasers are focused on them. They're also small enough that it's possible to understand them and to feel like one can get them right—at least in comparison to anything else. The community's passion for correctness, so frustrated in most other places, ends up pouring into this. This creates a strongly reinforcing loop on HN's front page. The feeling of HN titles being accurate and neutral—"I want it to be bookish" was what PG originally told me—gets compounded and cements into an expectation that things must be that way. If they're not, strong frustration exerts pressure to make it that way. This is what I mean by force of nature. And when readers see that they actually have influence over this place, like when people object to a title and we change it, they bond with it more closely and the loop gets stronger. It also gets stronger because of the contrast between HN and other places on the internet, which have to play games to get clicks that we are blessed with not having to play: https://hn.algolia.com/?sort=byDate&dateRange=all&type=comment&storyText=false&prefix=false&page=0&query=by:dang%20yc%20hn%20valuable https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme.... The brain works in contrasts, and the contrast between the neutral HN style and most other places is so sharp that it creates an "ow my eyes" effect going one way and an "ahh" feeling of relief going the other. HN being text-based affects that too: no garish images, no flashing lights, no loud videos. The more often people come here, the more such small contrasts get registered—thousands of them. We're all conditioned now to expect HN's front page to be this way. Coming here should feel like walking into a library. It's an interesting question what all this emotion that people feel about HN titles, the HN frontpage, and HN itself is really related to. It's far too strong to only be about HN, which is merely an internet forum and basically just an entertainment site.
  - thunderbong 7y ago
    Dang, I think you've summarised the difference between news and 'news' in three paragraphs wonderfully. Everyone keeps saying that moderation is a thankless job and I thank you out for it. But I'd like to take this chance to thank you for the insights that you post. They give me an amazing insight to this teeming mass called humanity and help me see the 'humane' part of it despite everything to the contrary.
  - rayiner 7y ago
    In an age of click bait, HN’s title moderation is really fantastic and measured. Thank you.
  - ericd 7y ago
    Excellent points, and excellent work moderating, thanks for all you do. I think the point about the headlines being the one thing everyone reads is especially important for everyone to realize, and I wish the people coming up with titles would realize and take seriously the huge responsibility they have, not just for the number of clicks they garner, but also the fact that very often people read that as the summary and internalize it as fact. Every time the writers stretch the truth to get more clicks, they’re doing slight harm to huge numbers of people. Thanks for keeping this corner of the internet a bit cleaner of that.
    - dang 7y ago
      The problem is systemic. Those tricks work in the short term, forcing everyone to use them. The long term costs are externalities. HN is in a special position, maybe even a unique one. If it were a standalone business we'd have to optimize for traffic, not curiosity. It's only because HN is part of YC that it can be HN.
      - ericd 7y ago
        You’re right, I just hope they feel some shame as they do it. I’d hoped that trying to maintain their brand would have kept NYT from this, but it seems like no one is immune.
- thaumasiotes 7y ago
  > If “loophole” were an incorrect choice of words it would not be in the headline. Wow, that's... generous.
  - asr 7y ago
    “Correct” here was not supposed to mean you must agree. As others have pointed out “loophole” is often in the eye of the beholder. But I mean to say that it’s not inaccurate to use the word loophole in such a way that a mod should change the title.
- deleted 7y ago
  [deleted]
- TuringNYC 7y ago
  Actually learning that the NYTimes calls this a “loophole” is much of the story for me — it is part of a growing anti-tech worker rhetoric. It is part of a similar narrative that tries to justify breaking up tech firms but conveniently ignores telco, pharma, insurance, etc.

Finnucane 7y ago

Loophole doesn’t have a strict definition. Almost any deduction could be a loophole. Usually it is referring to anything that helps people with high incomes avoid paying taxes.

kaycebasques 7y ago
The definition is very straightforward. It’s a loophole when others do it, especially those I don’t like, but it’s a tax break when I do it.
- Finnucane 7y ago
  True, and if poor people could hire lobbyists and tax attorneys, they’d get more loopholes too.
  - zaroth 7y ago
    Progressive tax rates, the doubled standard deduction, child tax credit, EITC, and Medicaid expansion are all pretty sweet “loopholes” for those on the lower end of the AGI spectrum.
    - thepangolino 7y ago
      For me a loophole is something that requires a certain amount of work to benefit from. Much more than ticking in a box in a standard form.
      - zaroth 7y ago
        For what it’s worth, QSBS is just a matter of filling in the dollar amount and writing “Section 1202 exclusion”. To me a loophole is something where you have to perform some sort of otherwise unnecessary accounting procedure in order to qualify. For example, forming an S Corp to funnel contracting income through, solely for the purpose of avoiding the 3.8% payroll surtax.

ForHackernews 7y ago

It does seem like taking the piss for a multimillion dollar startup to qualify as a "small business". Just because you're staying within the letter of the law doesn't mean it's not a loophole -- arguably that's exactly what a loophole is. According to the article, professional accountants consider this scheme dubious.

walshemj 7y ago
You know startups start you know start small Apples initial seed capital was a few thousands I believe. The UK has something similar for small companies the EMI share schemes - all of the employees where I work have these options.

zaroth 7y ago

> QSBS can save you a lot, but it can be a lot of work to file too. I ran up about $20k in accountant bills doing it on a complex deal. I don’t understand this. You just claim it on the Schedule D. As far as I know, you don’t file any documentation at the time of the tax return, you simply attest that it qualifies.

bradleyjg 7y ago

Okay, let's call it a tax expenditure instead. What public interest is this expenditure advancing and how efficiently is it advancing that interest as compared to alternative expenditures?

betterunix2 7y ago
It incentivizes investments in small businesses, which generally have trouble attracting investors because of the high risk of failure. In general we want people to take risks and start new businesses to maintain a healthy and competitive market. That employees who are paid in stock also benefit is a good thing, because in addition to capital investments a startup also requires talented workers to help get off the ground.