Most effective way of selling the already vested RSU???

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Topic Author
InvestVS
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Most effective way of selling the already vested RSU???

Post by InvestVS »

I have 23% of my portfolio invested in my employer stock through RSU vesting. The reason I have accumulated so much is that my employer has a trading window when I cannot sell my vested RSU. Most of the time my RSU is vesting during that window and If I sell after the selling window is open then I need to pay short term gain (I am in the highest tax bracket). So I did not sell any vested RSU till now for current employer.

Now given that it is 23% of my portfolio, I am concerned for diversification. Most of my other investment is in index fund, I have another 10% in single stock from my spouse's employer RSU and both of these employer are tech industry. Personal capital shows I have 73% of my portfolio in IT.

Fo this employeers RSU, I have two lots which I can sell (window is open now), one will put long term gain and another will short term gain (these got vested in July this year). If I sell the long term gain lot, it will bring my employer stock as 16% (reduction of 7%) and if I sell short term gain lot it will bring it down to 19%(reduction of 7%). Selling both will bring it down 12% which is close to 10% (as max % advised by boglehead books).

I am planning to use the money from the sale to either pay down part of my mortgage or reinvest in a diversified index fund.

Selling long term gain lot will result in 35% tax kick (roughly $24K) and selling short term gain lot will result in 52% tax kick (roughly $10K). Not sure what is the best option here and looking for advise from experts (1) Sell long term gain lot now and another lot when it become long term in one year (2) Sell both of them now and take the tax hit or any other option I am not able to see that.
shess
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Re: Most effective way of selling the already vested RSU???

Post by shess »

InvestVS wrote: Thu Aug 27, 2020 2:08 am I have 23% of my portfolio invested in my employer stock through RSU vesting. The reason I have accumulated so much is that my employer has a trading window when I cannot sell my vested RSU. Most of the time my RSU is vesting during that window and If I sell after the selling window is open then I need to pay short term gain (I am in the highest tax bracket). So I did not sell any vested RSU till now for current employer.
I'm not sure I understand how the window is being used, here. Based on past experience with RSUs, if you vest shares then some shares are withheld to cover taxes, so at vest you receive some shares with a basis as of the vest date plus some leftover cash. If you sold those shares immediately, you would likely have a short-term gain or loss because you'd sell at a specific price which would be unlikely to match the calculations used to value the shares at vest (often average of high and low for the day).

Anyhow, in this case if the shares vest at a fair market value of $100, then if you sell at $110, you only pay short-term rates on the $10 in gains. Personally, I'd just sell when the window opens and not worry about it. If your company stock is routinely giving you 10% gains in the month or two it takes the window to open, that's a really nice problem to have.

Not sure where you're getting the tax rates you posted from. 52% sounds plausible for marginal rate plus state tax plus FICA (social security and medicare) - but short-term gains are not earned income, so you don't pay FICA on those.

(Apologies if I made grossly incorrect assumptions about your RSU program.)
Tingting1013
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Re: Most effective way of selling the already vested RSU???

Post by Tingting1013 »

shess wrote: Thu Aug 27, 2020 2:31 am Not sure where you're getting the tax rates you posted from.
Here is a guess.

Short term cap gains: 37% Fed + 11.3% CA + 3.8% NIIT = 52.1%

Long term cap gains: 20% Fed + 11.3% CA + 3.8% NIIT = 35.1%
AnEngineer
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Re: Most effective way of selling the already vested RSU???

Post by AnEngineer »

InvestVS wrote: Thu Aug 27, 2020 2:08 am
Fo this employeers RSU, I have two lots which I can sell (window is open now), one will put long term gain and another will short term gain (these got vested in July this year). If I sell the long term gain lot, it will bring my employer stock as 16% (reduction of 7%) and if I sell short term gain lot it will bring it down to 19%(reduction of 7%). Selling both will bring it down 12% which is close to 10% (as max % advised by boglehead books).
Are you saying that you have RSUs that you can't sell? Why would selling both lots not bring you down to 0%?
EddyB
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Re: Most effective way of selling the already vested RSU???

Post by EddyB »

AnEngineer wrote: Thu Aug 27, 2020 8:13 am
InvestVS wrote: Thu Aug 27, 2020 2:08 am
Fo this employeers RSU, I have two lots which I can sell (window is open now), one will put long term gain and another will short term gain (these got vested in July this year). If I sell the long term gain lot, it will bring my employer stock as 16% (reduction of 7%) and if I sell short term gain lot it will bring it down to 19%(reduction of 7%). Selling both will bring it down 12% which is close to 10% (as max % advised by boglehead books).
Are you saying that you have RSUs that you can't sell? Why would selling both lots not bring you down to 0%?
The ones that remain unvested?
AnEngineer
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Re: Most effective way of selling the already vested RSU???

Post by AnEngineer »

EddyB wrote: Thu Aug 27, 2020 8:16 am
AnEngineer wrote: Thu Aug 27, 2020 8:13 am
InvestVS wrote: Thu Aug 27, 2020 2:08 am
Fo this employeers RSU, I have two lots which I can sell (window is open now), one will put long term gain and another will short term gain (these got vested in July this year). If I sell the long term gain lot, it will bring my employer stock as 16% (reduction of 7%) and if I sell short term gain lot it will bring it down to 19%(reduction of 7%). Selling both will bring it down 12% which is close to 10% (as max % advised by boglehead books).
Are you saying that you have RSUs that you can't sell? Why would selling both lots not bring you down to 0%?
The ones that remain unvested?
Of course, whoops. I don't count those in my net worth as I don't actually own them. If I quit or lose my job, they disappear.
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TomatoTomahto
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Re: Most effective way of selling the already vested RSU???

Post by TomatoTomahto »

AnEngineer wrote: Thu Aug 27, 2020 8:18 am
EddyB wrote: Thu Aug 27, 2020 8:16 am
AnEngineer wrote: Thu Aug 27, 2020 8:13 am
InvestVS wrote: Thu Aug 27, 2020 2:08 am
Fo this employeers RSU, I have two lots which I can sell (window is open now), one will put long term gain and another will short term gain (these got vested in July this year). If I sell the long term gain lot, it will bring my employer stock as 16% (reduction of 7%) and if I sell short term gain lot it will bring it down to 19%(reduction of 7%). Selling both will bring it down 12% which is close to 10% (as max % advised by boglehead books).
Are you saying that you have RSUs that you can't sell? Why would selling both lots not bring you down to 0%?
The ones that remain unvested?
Of course, whoops. I don't count those in my net worth as I don't actually own them. If I quit or lose my job, they disappear.
Yes, better to think of them as salary not yet earned. It would be similar to counting the next 3 years salary (our typical vesting period) as income already earned, which of course it is not.

There are industries (I thought all of them, but apparently not) where losing a job means you vest.
I get the FI part but not the RE part of FIRE.
Topic Author
InvestVS
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Re: Most effective way of selling the already vested RSU???

Post by InvestVS »

Thanks, everyone for the responses and clarifications!

So the message I am getting is - it makes sense to sell once the window open even it means taking it with short term gain tax.

My another question is - what to do with what I already have and are in long term lot, sell them and tax hit right now?

My take on tax is that we all try to reduce the tax by not selling before retirement with the assumption that we will be in a lower tax bracket after retirement. This may be specific to high net worth individuals but isn't those guys still be paying high tax after retirements as well as inflation will bring them earning (dividents etc.) after retirement in a high bracket in the next 10-15 years (assuming someone is retiring in 10-15 years).
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TomatoTomahto
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Re: Most effective way of selling the already vested RSU???

Post by TomatoTomahto »

InvestVS wrote: Thu Aug 27, 2020 9:55 am My take on tax is that we all try to reduce the tax by not selling before retirement with the assumption that we will be in a lower tax bracket after retirement. This may be specific to high net worth individuals but isn't those guys still be paying high tax after retirements as well as inflation will bring them earning (dividents etc.) after retirement in a high bracket in the next 10-15 years (assuming someone is retiring in 10-15 years).
HNW individual here. The last thing we want is a bunch of vested and unsold RSUs after retirement. Not speculating on tax rates, but with RMDs, pensions, deferred compensation, etc., I’d rather pay the piper now.
I get the FI part but not the RE part of FIRE.
humblecoder
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Re: Most effective way of selling the already vested RSU???

Post by humblecoder »

I am in a similar situation as you:
- I receive RSUs as bonus compensation which vest after one year
- When the RSU's vest I generally cannot sell them immediately because my stock "trading window" is not opened yet

[For those following along at home, when we say "trading window" or "window", we are referring to the period of time during which we are allowed to buy/sell stock in our employer's company. In my case, the "window" is "opened" (meaning I can trade the stock) from the day after the quarterly earnings announcement until the last day of the following month]

In my case, the RSU's vest mid-March, but the trading window doesn't open until the end of April. Therefore, by the time I can sell the vested stock, I may have a short term capital gain. Normally, I'll just sell it at the STCG rate if the gain is "not significant". If the capital gain is significant, I might decide to hold the stock until I can sell it at the LTCG rate. It's a bit of a gamble to wait until the stock is eligible for LTCG, I admit, since the stock could go down enough such that I would have been better off taking the STCG hit, but if I end up selling at a loss a year later, I can use it for tax gain harvesting purposes.

Regarding whether to "let it ride" with the stock that is eligible for LTCG, I would consider taking the tax hit right now, since having such a large position in one company is not optimal.
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Re: Most effective way of selling the already vested RSU???

Post by Jack FFR1846 »

I think there is a lot of mis-understanding about taxing of RSU's.

Say you are vested and each share is worth $100. You're in the 24% bracket. The instant this stock vests and releases to you, you owe ordinary income tax of $24. It doesn't matter if you keep that stock, sell it, or even gift it. You pay that tax. Of course, if you gift it, then maybe you get some of that back.

What is the subject of further consideration is the gain from that $100 price. If your trading window opens and the stock is now $110, you can sell then and pay 24% of $10 or $2.40. Or you can wait until the shares qualify for long term cap gains and pay the LTCG tax rate, which will be lower. Say it's 15%....you pay $1.50. So for waiting to qualify for LTCG, you're saving 90 cents a share. I don't know if that time is 1 year or 2 years as I always sell at vest.

As another example, the stock vests at $100, you pay your $24 tax and you hold it for 3 years and then sell at a price of $100. There's zero tax on cap gain. Had you sold at vest, you also would have paid zero tax on cap gain.

I do think that there's some confusion with how RSUs work compared to the old way with options. They are not the same at all.
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AnEngineer
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Re: Most effective way of selling the already vested RSU???

Post by AnEngineer »

humblecoder wrote: Thu Aug 27, 2020 10:05 am
[For those following along at home, when we say "trading window" or "window", we are referring to the period of time during which we are allowed to buy/sell stock in our employer's company. In my case, the "window" is "opened" (meaning I can trade the stock) from the day after the quarterly earnings announcement until the last day of the following month]
I'll add that not everyone in the company is necessarily bound by the trading window, it depends on company policy. It's intended to help avoid insider trading, which is always illegal whether during the window or not. I assume the OP is bound by the window, but it may not affect you.
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InvestVS
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Re: Most effective way of selling the already vested RSU???

Post by InvestVS »

Jack FFR1846 wrote: Thu Aug 27, 2020 10:34 am I think there is a lot of mis-understanding about taxing of RSU's.

Say you are vested and each share is worth $100. You're in the 24% bracket. The instant this stock vests and releases to you, you owe ordinary income tax of $24. It doesn't matter if you keep that stock, sell it, or even gift it. You pay that tax. Of course, if you gift it, then maybe you get some of that back.

What is the subject of further consideration is the gain from that $100 price. If your trading window opens and the stock is now $110, you can sell then and pay 24% of $10 or $2.40. Or you can wait until the shares qualify for long term cap gains and pay the LTCG tax rate, which will be lower. Say it's 15%....you pay $1.50. So for waiting to qualify for LTCG, you're saving 90 cents a share. I don't know if that time is 1 year or 2 years as I always sell at vest.

As another example, the stock vests at $100, you pay your $24 tax and you hold it for 3 years and then sell at a price of $100. There's zero tax on cap gain. Had you sold at vest, you also would have paid zero tax on cap gain.

I do think that there's some confusion with how RSUs work compared to the old way with options. They are not the same at all.
We do understand that, questions here is related to capital gain related tax.
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TechGuy365
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Re: Most effective way of selling the already vested RSU???

Post by TechGuy365 »

TomatoTomahto wrote: Thu Aug 27, 2020 10:02 am
InvestVS wrote: Thu Aug 27, 2020 9:55 am My take on tax is that we all try to reduce the tax by not selling before retirement with the assumption that we will be in a lower tax bracket after retirement. This may be specific to high net worth individuals but isn't those guys still be paying high tax after retirements as well as inflation will bring them earning (dividents etc.) after retirement in a high bracket in the next 10-15 years (assuming someone is retiring in 10-15 years).
HNW individual here. The last thing we want is a bunch of vested and unsold RSUs after retirement. Not speculating on tax rates, but with RMDs, pensions, deferred compensation, etc., I’d rather pay the piper now.
Thanks for the insight. Can you explain a little more on why it's undesirable to hold vested and unsold RSUs after retirement? Isn't it just stocks in the company you worked for, in a taxable account? Is it because of the low cost basis?
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TomatoTomahto
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Re: Most effective way of selling the already vested RSU???

Post by TomatoTomahto »

TechGuy365 wrote: Thu Aug 27, 2020 11:27 am
TomatoTomahto wrote: Thu Aug 27, 2020 10:02 am
InvestVS wrote: Thu Aug 27, 2020 9:55 am My take on tax is that we all try to reduce the tax by not selling before retirement with the assumption that we will be in a lower tax bracket after retirement. This may be specific to high net worth individuals but isn't those guys still be paying high tax after retirements as well as inflation will bring them earning (dividents etc.) after retirement in a high bracket in the next 10-15 years (assuming someone is retiring in 10-15 years).
HNW individual here. The last thing we want is a bunch of vested and unsold RSUs after retirement. Not speculating on tax rates, but with RMDs, pensions, deferred compensation, etc., I’d rather pay the piper now.
Thanks for the insight. Can you explain a little more on why it's undesirable to hold vested and unsold RSUs after retirement? Isn't it just stocks in the company you worked for, in a taxable account? Is it because of the low cost basis?
This might not apply to everyone, but I’d rather realize a dollar today (when I know the tax rate) than have my widow realize a dollar x years from now at an unknown, but probably higher, rate. We already have more in our tax deferred accounts than is optimal, she will have significant income for 3 or 4 years after retirement, at some point she will likely be filing single, we think future tax rates are more likely to go up than down, etc. Add to that the outsized risk of having so many eggs in one (employer’s) basket, and we do not hold any employer stock that we don’t have to. Three years of unvested RSUs (it’s a rolling basket, as shares vest, they are replenished annually) that amount collectively to a year’s total comp (give or take) is enough thanks.
I get the FI part but not the RE part of FIRE.
humblecoder
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Re: Most effective way of selling the already vested RSU???

Post by humblecoder »

Jack FFR1846 wrote: Thu Aug 27, 2020 10:34 am I think there is a lot of mis-understanding about taxing of RSU's.

Say you are vested and each share is worth $100. You're in the 24% bracket. The instant this stock vests and releases to you, you owe ordinary income tax of $24. It doesn't matter if you keep that stock, sell it, or even gift it. You pay that tax. Of course, if you gift it, then maybe you get some of that back.

What is the subject of further consideration is the gain from that $100 price. If your trading window opens and the stock is now $110, you can sell then and pay 24% of $10 or $2.40. Or you can wait until the shares qualify for long term cap gains and pay the LTCG tax rate, which will be lower. Say it's 15%....you pay $1.50. So for waiting to qualify for LTCG, you're saving 90 cents a share. I don't know if that time is 1 year or 2 years as I always sell at vest.

As another example, the stock vests at $100, you pay your $24 tax and you hold it for 3 years and then sell at a price of $100. There's zero tax on cap gain. Had you sold at vest, you also would have paid zero tax on cap gain.

I do think that there's some confusion with how RSUs work compared to the old way with options. They are not the same at all.
What you stated above isn't exactly how MY RSU's work. Emphasis on "MY" because I don't know how other companies do it.

In my case, the taxes are withheld BEFORE the RSU's are converted to stock shares. Using your example, if I have 1 RSU and the stock price is $100, when the RSU vests, only $76 would be converted to stock if I have to pay $24 in taxes. In other words, after the RSU vests, I would have 0.76 shares of stock with a cost basis of $100 per share (or $76 dollars). In essence, they are immediately liquidating some of my converted RSU's and withholding that for tax purposes.

If the stock price goes up to $110 and I sell, I'd have a cap gains of only $7.60 ($10 gain per share times 0.76 shares).

Finally, in my case, they also withhold state tax, social security, and medicare taxes, so I end up with more like 0.6 actual shares for every RSU.

RSU's might work differently with your employer, but this is how it works at mine.
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TechGuy365
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Re: Most effective way of selling the already vested RSU???

Post by TechGuy365 »

TomatoTomahto wrote: Thu Aug 27, 2020 11:39 am
TechGuy365 wrote: Thu Aug 27, 2020 11:27 am
TomatoTomahto wrote: Thu Aug 27, 2020 10:02 am
InvestVS wrote: Thu Aug 27, 2020 9:55 am My take on tax is that we all try to reduce the tax by not selling before retirement with the assumption that we will be in a lower tax bracket after retirement. This may be specific to high net worth individuals but isn't those guys still be paying high tax after retirements as well as inflation will bring them earning (dividents etc.) after retirement in a high bracket in the next 10-15 years (assuming someone is retiring in 10-15 years).
HNW individual here. The last thing we want is a bunch of vested and unsold RSUs after retirement. Not speculating on tax rates, but with RMDs, pensions, deferred compensation, etc., I’d rather pay the piper now.
Thanks for the insight. Can you explain a little more on why it's undesirable to hold vested and unsold RSUs after retirement? Isn't it just stocks in the company you worked for, in a taxable account? Is it because of the low cost basis?
This might not apply to everyone, but I’d rather realize a dollar today (when I know the tax rate) than have my widow realize a dollar x years from now at an unknown, but probably higher, rate. We already have more in our tax deferred accounts than is optimal, she will have significant income for 3 or 4 years after retirement, at some point she will likely be filing single, we think future tax rates are more likely to go up than down, etc. Add to that the outsized risk of having so many eggs in one (employer’s) basket, and we do not hold any employer stock that we don’t have to. Three years of unvested RSUs (it’s a rolling basket, as shares vest, they are replenished annually) that amount collectively to a year’s total comp (give or take) is enough thanks.
Got it, thanks - this is helpful. I appreciate you calling out the employer stocks risk. I understand that risk but decided to keep everything anyway due to the huge upside in mega tech, and I'm glad I did. As for your comment on unknown tax for your (future) widow, doesn't our stocks get repriced at a new basis when we die (assuming that provision of the tax law is not changed)? I don't plan on dying soon but repricing of cost basis is definitely something I'm hoping to take advantage of. I want to make sure I don't have any blind spots. Thank you.
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Re: Most effective way of selling the already vested RSU???

Post by humblecoder »

TomatoTomahto wrote: Thu Aug 27, 2020 11:39 am This might not apply to everyone, but I’d rather realize a dollar today (when I know the tax rate) than have my widow realize a dollar x years from now at an unknown, but probably higher, rate.
Wouldn't your widow get the "stepped up" cost basis? Granted that rule can be changed at the whim of the powers-that-be, but to realize the gains today for just that reason doesn't seem like a good bet.
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TomatoTomahto
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Re: Most effective way of selling the already vested RSU???

Post by TomatoTomahto »

humblecoder wrote: Thu Aug 27, 2020 2:05 pm
TomatoTomahto wrote: Thu Aug 27, 2020 11:39 am This might not apply to everyone, but I’d rather realize a dollar today (when I know the tax rate) than have my widow realize a dollar x years from now at an unknown, but probably higher, rate.
Wouldn't your widow get the "stepped up" cost basis? Granted that rule can be changed at the whim of the powers-that-be, but to realize the gains today for just that reason doesn't seem like a good bet.
The basis is the least of her worries. The SINGLE filing status will be the problem, and all of the other income (I know, I know, first world problem). I haven’t looked into this, but if they were her shares (ie, she was given them by employer), can she roll them into a joint taxable account? Otherwise, there won’t be a step up in basis, right?
I get the FI part but not the RE part of FIRE.
humblecoder
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Re: Most effective way of selling the already vested RSU???

Post by humblecoder »

TomatoTomahto wrote: Thu Aug 27, 2020 2:25 pm The basis is the least of her worries. The SINGLE filing status will be the problem, and all of the other income (I know, I know, first world problem). I haven’t looked into this, but if they were her shares (ie, she was given them by employer), can she roll them into a joint taxable account? Otherwise, there won’t be a step up in basis, right?
That's not the way "stepped up" cost basis works, from what I understand.

Here is an extreme example, but hopefully it helps illuminate the concept.

Let's say I have a stock that I purchased for $100. Now it is worth $300. Cap gains is $200. If I sell the stock today, I would pay the long term cap gains rate on that $200 gain ($200 times 15% assuming that's my rate = $30)

Now let's say I die tomorrow and my wife inherits the stock. The new cost basis for her is now $300. If she were to sell it immediately, she would pay ZERO taxes because there is no capital gains ($300 sale price = $300 cost basis = $0 cap gains). So today I would pay $30 in taxes but tomorrow when I am dead my wife would pay nothing.

Going back to your original post, if your intent at selling the stock before you die is in order to save your widow from a potential higher rate, it would have the opposite effect because if you hadn't sold the stock, she would have inherited it at the higher basis, reducing the cap gains.

What you originally said makes sense for ordinary income. For instance, if you have an IRA with Required Minimum Distributions and you die, your spouse now needs to make the same distributions but they are now taxed at the single filer rate which is higher. But in the case of capital gains, the step up rule means that the opposite applies. It is better to not sell if you are worried about minimizing your spouse's tax burden.

Again, I will add the caveat that it is possible that Congress will eliminate the step up rule at some point. However, that seems like a low probability event, or at least a low enough probability that it isn't worth selling your stock and paying taxes on the gain on the off chance that the rule changes.
MathIsMyWayr
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Re: Most effective way of selling the already vested RSU???

Post by MathIsMyWayr »

humblecoder wrote: Thu Aug 27, 2020 3:07 pm
TomatoTomahto wrote: Thu Aug 27, 2020 2:25 pm The basis is the least of her worries. The SINGLE filing status will be the problem, and all of the other income (I know, I know, first world problem). I haven’t looked into this, but if they were her shares (ie, she was given them by employer), can she roll them into a joint taxable account? Otherwise, there won’t be a step up in basis, right?
That's not the way "stepped up" cost basis works, from what I understand.

Here is an extreme example, but hopefully it helps illuminate the concept.

Let's say I have a stock that I purchased for $100. Now it is worth $300. Cap gains is $200. If I sell the stock today, I would pay the long term cap gains rate on that $200 gain ($200 times 15% assuming that's my rate = $30)

Now let's say I die tomorrow and my wife inherits the stock. The new cost basis for her is now $300. If she were to sell it immediately, she would pay ZERO taxes because there is no capital gains ($300 sale price = $300 cost basis = $0 cap gains). So today I would pay $30 in taxes but tomorrow when I am dead my wife would pay nothing.

Going back to your original post, if your intent at selling the stock before you die is in order to save your widow from a potential higher rate, it would have the opposite effect because if you hadn't sold the stock, she would have inherited it at the higher basis, reducing the cap gains.

What you originally said makes sense for ordinary income. For instance, if you have an IRA with Required Minimum Distributions and you die, your spouse now needs to make the same distributions but they are now taxed at the single filer rate which is higher. But in the case of capital gains, the step up rule means that the opposite applies. It is better to not sell if you are worried about minimizing your spouse's tax burden.

Again, I will add the caveat that it is possible that Congress will eliminate the step up rule at some point. However, that seems like a low probability event, or at least a low enough probability that it isn't worth selling your stock and paying taxes on the gain on the off chance that the rule changes.
Isn't stepped up of basis apply to community proprerty states? I don't think Massachusetts is one of them.
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Re: Most effective way of selling the already vested RSU???

Post by cashheavy18 »

TomatoTomahto wrote: Thu Aug 27, 2020 2:25 pm
humblecoder wrote: Thu Aug 27, 2020 2:05 pm
TomatoTomahto wrote: Thu Aug 27, 2020 11:39 am This might not apply to everyone, but I’d rather realize a dollar today (when I know the tax rate) than have my widow realize a dollar x years from now at an unknown, but probably higher, rate.
Wouldn't your widow get the "stepped up" cost basis? Granted that rule can be changed at the whim of the powers-that-be, but to realize the gains today for just that reason doesn't seem like a good bet.
The basis is the least of her worries. The SINGLE filing status will be the problem, and all of the other income (I know, I know, first world problem). I haven’t looked into this, but if they were her shares (ie, she was given them by employer), can she roll them into a joint taxable account? Otherwise, there won’t be a step up in basis, right?
After leaving my employer, I rolled over all vested shares into our join brokerage account. So, definitely can be done.
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TomatoTomahto
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Re: Most effective way of selling the already vested RSU???

Post by TomatoTomahto »

Going back to your original post, if your intent at selling the stock before you die is in order to save your widow from a potential higher rate, it would have the opposite effect because if you hadn't sold the stock, she would have inherited it at the higher basis, reducing the cap gains.
You missed my point. It is HER RSUs, not mine. She can’t inherit from herself.

ETA: unless perhaps we put the shares into a joint account. In any case, we don’t hold vested RSUs, so it’s academic.
I get the FI part but not the RE part of FIRE.
humblecoder
Posts: 259
Joined: Thu Aug 06, 2020 8:46 am

Re: Most effective way of selling the already vested RSU???

Post by humblecoder »

TomatoTomahto wrote: Thu Aug 27, 2020 3:23 pm
Going back to your original post, if your intent at selling the stock before you die is in order to save your widow from a potential higher rate, it would have the opposite effect because if you hadn't sold the stock, she would have inherited it at the higher basis, reducing the cap gains.
You missed my point. It is HER RSUs, not mine. She can’t inherit from herself.

ETA: unless perhaps we put the shares into a joint account. In any case, we don’t hold vested RSUs, so it’s academic.
DUH!!! My apologies for the confusion. Your comment makes more sense now.
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TomatoTomahto
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Re: Most effective way of selling the already vested RSU???

Post by TomatoTomahto »

humblecoder wrote: Thu Aug 27, 2020 3:33 pm
TomatoTomahto wrote: Thu Aug 27, 2020 3:23 pm
Going back to your original post, if your intent at selling the stock before you die is in order to save your widow from a potential higher rate, it would have the opposite effect because if you hadn't sold the stock, she would have inherited it at the higher basis, reducing the cap gains.
You missed my point. It is HER RSUs, not mine. She can’t inherit from herself.
ETA: unless perhaps we put the shares into a joint account. In any case, we don’t hold vested RSUs, so it’s academic.
DUH!!! My apologies for the confusion. Your comment makes more sense now.
No worries. We did the opposite of the common gender roles (especially 20 years ago); I was a Stay At Home Dad and she kicked butt at a job :D
I get the FI part but not the RE part of FIRE.
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TechGuy365
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Re: Most effective way of selling the already vested RSU???

Post by TechGuy365 »

TomatoTomahto wrote: Thu Aug 27, 2020 3:37 pm
humblecoder wrote: Thu Aug 27, 2020 3:33 pm
TomatoTomahto wrote: Thu Aug 27, 2020 3:23 pm
Going back to your original post, if your intent at selling the stock before you die is in order to save your widow from a potential higher rate, it would have the opposite effect because if you hadn't sold the stock, she would have inherited it at the higher basis, reducing the cap gains.
You missed my point. It is HER RSUs, not mine. She can’t inherit from herself.
ETA: unless perhaps we put the shares into a joint account. In any case, we don’t hold vested RSUs, so it’s academic.
DUH!!! My apologies for the confusion. Your comment makes more sense now.
No worries. We did the opposite of the common gender roles (especially 20 years ago); I was a Stay At Home Dad and she kicked butt at a job :D
Sorry we all made assumptions based on gender which we shouldn’t have. But step-up basis is definitely something that we will take advantages of, hopefully not too soon though.
kiwi123
Posts: 201
Joined: Sun Dec 02, 2012 7:37 pm

Re: Most effective way of selling the already vested RSU???

Post by kiwi123 »

InvestVS wrote: Thu Aug 27, 2020 2:08 am Not sure what is the best option here and looking for advise from experts (1) Sell long term gain lot now and another lot when it become long term in one year (2) Sell both of them now and take the tax hit or any other option I am not able to see that.
To answer your question... I suggest selling everything you can now.
1) Long term RSUs is a no-brainer -> you diversify and pay slightly lower taxes.
2) Short-term RSUs -> debatable but with the current market valuations i think you diversify asap and pay a small tax penalty.
AB609
Posts: 54
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Re: Most effective way of selling the already vested RSU???

Post by AB609 »

It's not clear from your post -- are you paying capital gains on the increase in value since vesting or are you looking at the total value for the RSU and assuming the capital gain is paid on that? On my RSU's, on the date they are distributed to me, Fidelity withholds (in shares) all the same taxes like my employer would on pay and deposits the remaining shares in my brokerage account. Capital gains only comes into play if I sit on the shares in my brokerage account (I don't) and they increase or decrease in value. Maybe there are different ways these things are structured but that is how mine works.
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