Blurryeyed Loc: NC Mountains.

What is wrong with you, you argue just to argue, read the link I posted it will explain it all to you The OP states that an executive can receive $1million in stock and use it to take out a loan and never pay taxes on it which is total BS. He would have to pay income tax at the moment that the stock becomes his property, he has some options and tax incentives as to how he may do that but regardless he will pay income tax on those stocks, not capital gains taxes as the OP states. In the second option he says that the executive will only pay capital gains taxes, that is a blatant lie.....

Triple G

Not at all - and this is coming from someone who administered stock compensation programs.


First of all, the stock given instead of salary takes that compensation out of the payroll tax realm so there is tax avoidance of all local, state, Federal Income, FUTA, SUTA taxes.

There are RSUs, grants, and options and they can all be income and tax deferred, but still used as loan collateral which is money rich people can get at a lot less cost of capital than salary.

Usually, stock compensation is granted within Non-Qualified Exec. Comp. programs where the tax rules are all different and once RSU, grant or options are fully vested, they get exercised through non-cash Roth Programs. Taxes are minimized all along the trail of paperwork.

It proves the point of the meme that rich people's taxation process has many more tax payment avoidance and minimization options. But, in your thinking you know better after reading one paragraph and call that truism as BS. You should stick with things you know about.

Triple G

Nothing is wrong with me. I'm calling BS on your BS because you are wrong. There is nothing mentioned about options in the example; it's all about stock. Arguing about options (which you know nothing about) does not make the OP BS as you've stated.

Triple G

I see where you've gone wrong. You think the OP meme says that ALL taxes are avoided. It doesn't say that. It says it eliminates taxation as income and taxes at capital gains rates. That is true for stock RSUs and grants which are actual stock transfers. Options are not mentioned in the meme because they are very different because if the stock price stays lower than the option price, the options will never be exercised and taxation treatment is moot. You are wrong. Stick with what you have working knowledge of rather than a paragraph that is irrelevant to the OP. Are you aware of all the taxation structures rich people put together as charitable trusts and tax deferral mechanisms? I have personally seen executive estate managers counsel their clients on when to time exercises and subscriptions where one is a loss which offsets the gain of another. Or, where the spread amounts are put straight into a charitable trust and avoids all taxation. Your assumption is that recipient always takes receipt of the compensation value--they don't.
They can keep it deferred for as long as possible and then settle within a charitable trust. But, until that time, it can be used as collateral. That's the point of the meme.

Triple G

This may help you.
https://corpgov.law.harvard.edu/2017/02/08/tax-implications-of-executive-pay-what-boards-need-to-know/#:~:text=ISOs%20avoid%20ordinary%20income%20tax%20at%20regular%20rates,on%20exercise%2C%20regardless%20of%20when%20the%20sale%20occurs.

Blurryeyed Loc: NC Mountains.

I stand by my statements and am unaccepting of yours and certainly the OP's. Now if you want to argue argue with these guys.

https://www.thetaxadviser.com/issues/2019/may/stock-based-compensation-basics.html

Triple G

It's the same article I used showing my points. How does it validate your points? It doesn't.

Stand in your ignorance, but at least others will see the truth in the meme. Are you really comfortable in your opinion and firm stance that rich people AREN't able to use stock instead of salary to avoid full income tax treatment? Because that's the truism message in the examples in the meme.

Blurryeyed Loc: NC Mountains.

Stand or maybe wallow in your own ignorance and lack of reading comprehension, it clearly indicates that all stock based compensation is taxed as income, gains accrued after the initial issuance can be handled a bit differently but the initial compensation will be taxed as income. It also totally destroys the OP.

Triple G

Only in Non-informed simplicity thinking. You should be smart enough to know that understanding tax implications of stock vs salary is a lot more complicated than that and certainly more than what's captured in one sentence you found that you think supports your understanding. It does not. It says that at a point in the exercise process that there is a time where ordinary income tax comes into play--it does not expound on how the tax can and is severely limited, deferred or eliminated altogether through NQ plans, Roth IRA's and Charity trusts. Certainly, the meme didn't go into that detail. I tried to educate you with actual real life information, but you're too proud, too insecure, or too ego-centric to admit that your knee-jerk statement of BS is just not defensible. What is wrong with you that you cannot allow the possibility that someone has the work experience to know more about something than you do? Do you believe I'm incorrect and blowing smoke?

Blurryeyed Loc: NC Mountains.

Whatever, a Roth is taxed when the monies are withdrawn, Charity Trusts means that you are giving a portion or all of that money to a qualifying tax exempt charity, NQ plans still pay income taxes when that money is realized by the executive, you are the one trying to make a false argument, all I said is that the scenario posted by the OP is Bullshit, that you can't just pay gains taxes when you take stock for a portion of your income which is true, no matter if you pay it for the current tax year or a future tax year that income will be exposed in its totality to income tax.

You are losing this argument but you are too silly to understand that.

SteveR Loc: Michigan

Is that like taking out a home equity loan but still continuing to reap the benefit as the house increases in value?

Triple G

You lost it from the get go with your bs comment. You were all over the board talking about options instead of stock.

Racmanaz Loc: Sunny Tucson!

The rich business owners will still pass those tax raises on the consumer even with a flat tax.

Triple G

https://www.equityftw.com/articles/how-to-avoid-taxes-on-rsus

Read about the charitable trusts. Do you see any taxes taken? I think your confusion of taxable event vs taxes paid is causing you problems. There is a taxable event when stocks fully vest, but that does not mean that taxes are paid. Rich people pay experienced tax attorneys and accountants to set up tax avoidance structures. Bottom line, rich people have the opportunity to avoid taxes altogether on a portion of their income by receiving it in stock.

Blaster34 Loc: Florida Treasure Coast

So if the top 10% pay roughly 47% of all taxes, how do the 1%…or 5%, or 10% escape? By taking advantage of the myriad of legal loopholes Congress fails to close! Until there is a new tax system in place (Flat or Fair Tax), there will never be an equitable system in place, especially the current regressive and punishing tax system.