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This isn't really true. If you receive RSUs as part of compensation, you have to pay taxes according to the value of the stock at the time of vesting. You also

This isn't really true. If you receive RSUs as part of compensation, you have to pay taxes according to the value of the stock at the time of vesting. You also have to pay tax when you sell the stock equal to the difference in price from vesting. You might get a refund or you might pay more taxes when you sell, but there is precedent to paying taxes on stock that you currently hold.

imgabe 5y ago
Isn’t that generally a problem where people get slammed with huge tax bills on stock they aren’t able to sell and may not have the cash available to pay? Why would we want to do more of that?
- bradjohnson 5y ago
  >Isn’t that generally a problem where people get slammed with huge tax bills on stock they aren’t able to sell and may not have the cash available to pay? No, I can't say I've ever heard of that happening. You should be able to sell to cover. This will typically happen during an open trading window and brokerages will offer an option for "sell to cover". >Why would we want to do more of that? I didn't make a value statement one way or the other. I'm just saying your claim is wrong and maybe your misunderstanding of taxation on stock is not the reason that unrealized capital gains aren't taxed.
  - imgabe 5y ago
    Ok correct me if I'm wrong, but RSUs are given to you as a part of your income, right? You don't buy them? That would make sense then to tax them as compensation. If the company gave you other non-cash items as a form of compensation, you would have to pay tax on that too. If the company rents an apartment for you, the value of the rent would be considered income. That is a lot different than buying a stock at $10, having it go up to $100, and you now have to pay taxes on the gain (which may be temporary, the day after you pay taxes it could go back to $10).
    - bradjohnson 5y ago
      First paragraph is correct. The caveat would be that the capital gain during sale is calculated based on the difference from the price at vesting. So the original taxation is carried with you while you hold the stock which is the mechanism that you thought didn't exist for a reason. For the second paragraph, it's not so different from real estate market fluctuations. You pay taxes based on the value of your property at a specific date even if that value tanks the very next day.
pwillia7 5y ago
Hey wait but those are for normal people!

imgabe 5y ago

Isn’t that generally a problem where people get slammed with huge tax bills on stock they aren’t able to sell and may not have the cash available to pay? Why would we want to do more of that?

bradjohnson 5y ago
>Isn’t that generally a problem where people get slammed with huge tax bills on stock they aren’t able to sell and may not have the cash available to pay? No, I can't say I've ever heard of that happening. You should be able to sell to cover. This will typically happen during an open trading window and brokerages will offer an option for "sell to cover". >Why would we want to do more of that? I didn't make a value statement one way or the other. I'm just saying your claim is wrong and maybe your misunderstanding of taxation on stock is not the reason that unrealized capital gains aren't taxed.
- imgabe 5y ago
  Ok correct me if I'm wrong, but RSUs are given to you as a part of your income, right? You don't buy them? That would make sense then to tax them as compensation. If the company gave you other non-cash items as a form of compensation, you would have to pay tax on that too. If the company rents an apartment for you, the value of the rent would be considered income. That is a lot different than buying a stock at $10, having it go up to $100, and you now have to pay taxes on the gain (which may be temporary, the day after you pay taxes it could go back to $10).
  - bradjohnson 5y ago
    First paragraph is correct. The caveat would be that the capital gain during sale is calculated based on the difference from the price at vesting. So the original taxation is carried with you while you hold the stock which is the mechanism that you thought didn't exist for a reason. For the second paragraph, it's not so different from real estate market fluctuations. You pay taxes based on the value of your property at a specific date even if that value tanks the very next day.

pwillia7 5y ago

Hey wait but those are for normal people!