14 ms·

RSUs are only taxed when the company is liquid, not when they are vested (which is one and the same post IPO). So the tax free options are really just locking

by lumost 4y ago

RSUs are only taxed when the company is liquid, not when they are vested (which is one and the same post IPO). So the tax free options are really just locking in long term cap gains. Of course the con is that it’s not actual compensation as the stroke will be equal to the present valuation.

mech4bg 4y ago
That’s not true. It depends on the RSU structure. We’ve had both types at my company. Also FWIW the company can withhold some shares as they vest but max 22% for federal.
sb8244 4y ago
The info I've seen for RSU indicates tax on vest, even if the stock is not liquid (private company). Is it really true that tax is only if the asset is liquid? Does the IRS make a distinction between liquid and illiquid here?
- ceras 4y ago
  If they're issued as double-trigger RSUs then you're only taxed when they're liquid. That's because they aren't really yours till a liquidation event.
  - renewiltord 4y ago
    You have to stay for the liquidation event, right? Even if you have a large amount positive there you're forced to remain at the job until the liquidity event.
    - lumost 4y ago
      No, once the RSUs vest, they are yours at liquidation.
      - renewiltord 4y ago
        But they won't vest, right? Here's what I mean: - At year 0, you're granted 100 RSUs on a double trigger with a 1 yr cliff, monthly vest after - At year 1, you have vested 0 but if the company went public you will immediately vest 25 - At year 4, with the company still private, you have vested 0 but if the company went public or had a liquidity event you will immediately vest 100 - At year 5, with the company still private, you are going to quit. If you vest now, you must pay tax, but no way to do that with cash unless company withholds RSU percentage In the double trigger case, at year 5, you leave empty handed. In the single trigger, you pay tax with illiquid stock (through withhold or pay cash). I've always only had options or stock, so do correct me if I'm wrong.

by lumost 4y ago

mech4bg 4y ago

That’s not true. It depends on the RSU structure. We’ve had both types at my company. Also FWIW the company can withhold some shares as they vest but max 22% for federal.

sb8244 4y ago

The info I've seen for RSU indicates tax on vest, even if the stock is not liquid (private company). Is it really true that tax is only if the asset is liquid? Does the IRS make a distinction between liquid and illiquid here?

ceras 4y ago
If they're issued as double-trigger RSUs then you're only taxed when they're liquid. That's because they aren't really yours till a liquidation event.
- renewiltord 4y ago
  You have to stay for the liquidation event, right? Even if you have a large amount positive there you're forced to remain at the job until the liquidity event.
  - lumost 4y ago
    No, once the RSUs vest, they are yours at liquidation.
    - renewiltord 4y ago
      But they won't vest, right? Here's what I mean: - At year 0, you're granted 100 RSUs on a double trigger with a 1 yr cliff, monthly vest after - At year 1, you have vested 0 but if the company went public you will immediately vest 25 - At year 4, with the company still private, you have vested 0 but if the company went public or had a liquidity event you will immediately vest 100 - At year 5, with the company still private, you are going to quit. If you vest now, you must pay tax, but no way to do that with cash unless company withholds RSU percentage In the double trigger case, at year 5, you leave empty handed. In the single trigger, you pay tax with illiquid stock (through withhold or pay cash). I've always only had options or stock, so do correct me if I'm wrong.