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>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,
by 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 agoOk 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 agoFirst 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.