ESPP vs RSU - what to sell first

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sdsu04
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ESPP vs RSU - what to sell first

Post by sdsu04 »

Hello!

I would like to get a better understanding on if there is a rule book on what company stock one should sell.

Say I have access to the following company stock: a) ESPP short term cap gain b) ESPP long term cap gain c) RSU short term cap gain d) RSU long term cap gain. What should I first sell if I need access to specific :moneybag post tax and reduce my tax liability as well while getting access to the :moneybag that I need.

ESPP: This is my understanding --
When I receive ESPP (@ a discount at a specific date in the year) there is no taxable event. Taxable event (both in W2 as earnings and cap gain/loss) happens during the time of sale. Keeping this in mind, I would always sell ESPP with long term cap gain before any ESPP with short term cap gain

RSU: This is my understanding --
When I receive RSU (stock grant based on my performance as a part of my total compensation) creates a taxable event during each vesting as it automatically generates a W2 income (even if I did nothing to sell the shares that vest). Then again when I sell the RSU it creates another taxable event in the form of capital gain/loss. So should I then sell RSU which *may* have no capital gain or should I sell the oldest RSU which would have only *long term* capital gain?

Between RSU and ESPP and assuming I have access to both long term and short term cap gain stocks - how do you decide what to sell first?

Thanks!
AnEngineer
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Re: ESPP vs RSU - what to sell first

Post by AnEngineer »

Getting RSU shares is not a reason to hold them. As you point out, there's no advantageous tax rule and trading costs are essentially zero now. Thus, I sell mine immediately and don't let them accumulate in the first place.

You're possibly missing one piece of ESPP shares, if you have a qualifying plan, then there's a tax benefit if you make a qualifying disposition, which is generally if you sell at least 2 years after the start of the grant date. If so, only the discount from the lookback price is taxable as W2 income. Otherwise, the discount from the FMV on the date you purchased the shares is taxed as W2 income. (BTW, your tax forms for ESPP sales will be incorrect, but your brokerage may provide you with supplemental information to fix it.)

All else equal, it makes sense to make qualifying disposition ESPP sales after all RSU sales, but total taxable income may be a concern. Also, if you have capital losses you may prefer to offset them against wages rather than capital gains (you'd be effectively paying income tax rates on your capital gains until the losses/$3000 is exhausted).

It's hard to say what to do without knowing your full picture, but I think the above captures the relevant considerations on the RSU and ESPP side.
Topic Author
sdsu04
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Re: ESPP vs RSU - what to sell first

Post by sdsu04 »

Thankyou for your response!

Is there a calculator out there, that one can use to help make this decision? Maybe I can use prior years TT and simulate a tax return scenario.

How do other bogleheads deal with this?
dboeger1
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Re: ESPP vs RSU - what to sell first

Post by dboeger1 »

AnEngineer wrote: Tue Jul 20, 2021 1:19 pm You're possibly missing one piece of ESPP shares, if you have a qualifying plan, then there's a tax benefit if you make a qualifying disposition, which is generally if you sell at least 2 years after the start of the grant date. If so, only the discount from the lookback price is taxable as W2 income. Otherwise, the discount from the FMV on the date you purchased the shares is taxed as W2 income.
Huh, funny, I did not know this (maybe my ESPP is not qualified?). I still have no interest in holding shares of my employer for 2 years, but that is an interesting variable nonetheless. I'm now wondering if my plan is qualified and I just missed that entirely.
AnEngineer
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Re: ESPP vs RSU - what to sell first

Post by AnEngineer »

dboeger1 wrote: Tue Jul 20, 2021 5:54 pm
AnEngineer wrote: Tue Jul 20, 2021 1:19 pm You're possibly missing one piece of ESPP shares, if you have a qualifying plan, then there's a tax benefit if you make a qualifying disposition, which is generally if you sell at least 2 years after the start of the grant date. If so, only the discount from the lookback price is taxable as W2 income. Otherwise, the discount from the FMV on the date you purchased the shares is taxed as W2 income.
Huh, funny, I did not know this (maybe my ESPP is not qualified?). I still have no interest in holding shares of my employer for 2 years, but that is an interesting variable nonetheless. I'm now wondering if my plan is qualified and I just missed that entirely.
It's not holding the stock for two years. Depending on how far the lookback is, it might be one year or less (though I think you still need to hit LTCG). Depending on how much the stock has gone up this makes your break even point notably less than the stock staying still, giving downside protection. If the lookback didn't trigger, though, you might as well sell right away.
SnowBog
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Re: ESPP vs RSU - what to sell first

Post by SnowBog »

If you have no restrictions on when you can sell...

Then from my point of view, just sell both ASAP.

In theory, if you can sell the RSU immediately - you will pay $0 tax (or more specifically - you'll owe no more or less than you already owe due to receiving the RSU.

For ESPP, as I understand it, you will always owe ordinary income tax on the discount amount. What's left is the how any gains are taxed. Again, if you can immediately sell the ESPP at the market price when it was purchased (so $0 gains), you'll owe no more or less taxes than you already owe (for the discount amount).

So I just sell both immediately...

One thing to watch for on ESPP is tax reporting. If you sell early, it's usually the brokerage will report the discount as a "gain" and your employer will report the discount on the end of year W2. You need to manually adjust accordingly...
AnEngineer
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Re: ESPP vs RSU - what to sell first

Post by AnEngineer »

SnowBog wrote: Tue Jul 20, 2021 6:59 pm For ESPP, as I understand it, you will always owe ordinary income tax on the discount amount. What's left is the how any gains are taxed. Again, if you can immediately sell the ESPP at the market price when it was purchased (so $0 gains), you'll owe no more or less taxes than you already owe (for the discount amount).
As I noted above, this is not true for many plans.
SnowBog
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Re: ESPP vs RSU - what to sell first

Post by SnowBog »

AnEngineer wrote: Tue Jul 20, 2021 7:24 pm
SnowBog wrote: Tue Jul 20, 2021 6:59 pm For ESPP, as I understand it, you will always owe ordinary income tax on the discount amount. What's left is the how any gains are taxed. Again, if you can immediately sell the ESPP at the market price when it was purchased (so $0 gains), you'll owe no more or less taxes than you already owe (for the discount amount).
As I noted above, this is not true for many plans.
Fair point, if you have a look back provision, you may have "gains" due to the look back. (My plan doesn't have a look back, so it didn't apply to me...)
tomsense76
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Re: ESPP vs RSU - what to sell first

Post by tomsense76 »

SnowBog wrote: Tue Jul 20, 2021 7:55 pm
AnEngineer wrote: Tue Jul 20, 2021 7:24 pm
SnowBog wrote: Tue Jul 20, 2021 6:59 pm For ESPP, as I understand it, you will always owe ordinary income tax on the discount amount. What's left is the how any gains are taxed. Again, if you can immediately sell the ESPP at the market price when it was purchased (so $0 gains), you'll owe no more or less taxes than you already owe (for the discount amount).
As I noted above, this is not true for many plans.
Fair point, if you have a look back provision, you may have "gains" due to the look back. (My plan doesn't have a look back, so it didn't apply to me...)
Had the same understanding as SnowBog for qualified plans as well. Though maybe the misunderstanding is simply about what the discount is applied to in different disposition cases? AIUI with a qualifying disposition, the discount on the subscription price is what is taxed as ordinary income (unless perhaps the stock performance was subpar and then could be less). Whereas a disqualifying disposition would recognize any gain (including the discount) as ordinary income. Does that match your understanding AnEngineer or am I missing something still?
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
SnowBog
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Re: ESPP vs RSU - what to sell first

Post by SnowBog »

tomsense76 wrote: Tue Jul 20, 2021 8:07 pm
SnowBog wrote: Tue Jul 20, 2021 7:55 pm
AnEngineer wrote: Tue Jul 20, 2021 7:24 pm
SnowBog wrote: Tue Jul 20, 2021 6:59 pm For ESPP, as I understand it, you will always owe ordinary income tax on the discount amount. What's left is the how any gains are taxed. Again, if you can immediately sell the ESPP at the market price when it was purchased (so $0 gains), you'll owe no more or less taxes than you already owe (for the discount amount).
As I noted above, this is not true for many plans.
Fair point, if you have a look back provision, you may have "gains" due to the look back. (My plan doesn't have a look back, so it didn't apply to me...)
Had the same understanding as SnowBog for qualified plans as well. Though maybe the misunderstanding is simply about what the discount is applied to in different disposition cases? AIUI with a qualifying disposition, the discount on the subscription price is what is taxed as ordinary income (unless perhaps the stock performance was subpar and then could be less). Whereas a disqualifying disposition would recognize any gain (including the discount) as ordinary income. Does that match your understanding AnEngineer or am I missing something still?
Let's say the discount is 10% - that part (as I understand it) will always be taxed as "ordinary income".

Let's say the stock on the day the ESPP executed was $100, so the "discount" was $10 - taxed as ordinary income. The rest would have $0 tax - if sold at $100 (as there were no "gains").

But I think what was referenced is some plans have what's called a "look back" provision. The purchase price is based off the lesser of the current price or a previous price (sometimes the price at open ESPP period, really lucky plans might be the lowest over the entire period).

To continue the example, let's say the look back ended up having a share price of $50 from 3 months ago. The 10% would now be a $5 discount, which would still (and always) be taxed as ordinary income. But the shares immediately have a $50 "gain" (due to the look back). If sold right away at $100 (the then current market price), that $50 "gain" is taxed at short term rates (aka ordinary income rates). But if they hold the stock for a > year, the $50 (and any additional gains) would then become "long term" gains.

My plan doesn't have a look back... So I might be wrong, but that's how I understand the difference...

Basically, no look back and/or the look back didn't end up lower than the current price - no meaningful advantage to hold...

But if you have a look back, and end up with meaningful "gains" because of it, it may be advantageous to wait until they become long term...
AnEngineer
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Re: ESPP vs RSU - what to sell first

Post by AnEngineer »

SnowBog wrote: Tue Jul 20, 2021 9:09 pm
tomsense76 wrote: Tue Jul 20, 2021 8:07 pm
SnowBog wrote: Tue Jul 20, 2021 7:55 pm
AnEngineer wrote: Tue Jul 20, 2021 7:24 pm
SnowBog wrote: Tue Jul 20, 2021 6:59 pm For ESPP, as I understand it, you will always owe ordinary income tax on the discount amount. What's left is the how any gains are taxed. Again, if you can immediately sell the ESPP at the market price when it was purchased (so $0 gains), you'll owe no more or less taxes than you already owe (for the discount amount).
As I noted above, this is not true for many plans.
Fair point, if you have a look back provision, you may have "gains" due to the look back. (My plan doesn't have a look back, so it didn't apply to me...)
Had the same understanding as SnowBog for qualified plans as well. Though maybe the misunderstanding is simply about what the discount is applied to in different disposition cases? AIUI with a qualifying disposition, the discount on the subscription price is what is taxed as ordinary income (unless perhaps the stock performance was subpar and then could be less). Whereas a disqualifying disposition would recognize any gain (including the discount) as ordinary income. Does that match your understanding AnEngineer or am I missing something still?
Let's say the discount is 10% - that part (as I understand it) will always be taxed as "ordinary income".

Let's say the stock on the day the ESPP executed was $100, so the "discount" was $10 - taxed as ordinary income. The rest would have $0 tax - if sold at $100 (as there were no "gains").

But I think what was referenced is some plans have what's called a "look back" provision. The purchase price is based off the lesser of the current price or a previous price (sometimes the price at open ESPP period, really lucky plans might be the lowest over the entire period).

To continue the example, let's say the look back ended up having a share price of $50 from 3 months ago. The 10% would now be a $5 discount, which would still (and always) be taxed as ordinary income. But the shares immediately have a $50 "gain" (due to the look back). If sold right away at $100 (the then current market price), that $50 "gain" is taxed at short term rates (aka ordinary income rates). But if they hold the stock for a > year, the $50 (and any additional gains) would then become "long term" gains.

My plan doesn't have a look back... So I might be wrong, but that's how I understand the difference...

Basically, no look back and/or the look back didn't end up lower than the current price - no meaningful advantage to hold...

But if you have a look back, and end up with meaningful "gains" because of it, it may be advantageous to wait until they become long term...
Close, but not quite. If sold as a disqualifying disposition, then the $55 discount is taxable as wage income (right now same rates as STCG). In a qualifying disposition, only the $5 is wage income. There are a few example here: https://turbotax.intuit.com/tax-tips/in ... /L8NgMFpFX.
SnowBog
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Re: ESPP vs RSU - what to sell first

Post by SnowBog »

AnEngineer wrote: Tue Jul 20, 2021 9:32 pm
SnowBog wrote: Tue Jul 20, 2021 9:09 pm ...
To continue the example, let's say the look back ended up having a share price of $50 from 3 months ago. The 10% would now be a $5 discount, which would still (and always) be taxed as ordinary income. But the shares immediately have a $50 "gain" (due to the look back). If sold right away at $100 (the then current market price), that $50 "gain" is taxed at short term rates (aka ordinary income rates). But if they hold the stock for a > year, the $50 (and any additional gains) would then become "long term" gains.
...
Close, but not quite. If sold as a disqualifying disposition, then the $55 discount is taxable as wage income (right now same rates as STCG). In a qualifying disposition, only the $5 is wage income. There are a few example here: https://turbotax.intuit.com/tax-tips/in ... /L8NgMFpFX.
I thought that's what I said... But you definitely said it more clearly! :beer
tomsense76
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Re: ESPP vs RSU - what to sell first

Post by tomsense76 »

SnowBog wrote: Tue Jul 20, 2021 10:46 pm
AnEngineer wrote: Tue Jul 20, 2021 9:32 pm
SnowBog wrote: Tue Jul 20, 2021 9:09 pm ...
To continue the example, let's say the look back ended up having a share price of $50 from 3 months ago. The 10% would now be a $5 discount, which would still (and always) be taxed as ordinary income. But the shares immediately have a $50 "gain" (due to the look back). If sold right away at $100 (the then current market price), that $50 "gain" is taxed at short term rates (aka ordinary income rates). But if they hold the stock for a > year, the $50 (and any additional gains) would then become "long term" gains.
...
Close, but not quite. If sold as a disqualifying disposition, then the $55 discount is taxable as wage income (right now same rates as STCG). In a qualifying disposition, only the $5 is wage income. There are a few example here: https://turbotax.intuit.com/tax-tips/in ... /L8NgMFpFX.
I thought that's what I said... But you definitely said it more clearly! :beer
Yeah that makes sense. Thanks for the detailed example.
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
tomsense76
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Re: ESPP vs RSU - what to sell first

Post by tomsense76 »

FWIW OP this article had some good tax advice on how to treat ESPP. Maybe this will help answer some of your other questions

https://www.forbes.com/sites/brucebrumb ... hase-plans
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
AnEngineer
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Re: ESPP vs RSU - what to sell first

Post by AnEngineer »

SnowBog wrote: Tue Jul 20, 2021 10:46 pm
AnEngineer wrote: Tue Jul 20, 2021 9:32 pm
SnowBog wrote: Tue Jul 20, 2021 9:09 pm ...
To continue the example, let's say the look back ended up having a share price of $50 from 3 months ago. The 10% would now be a $5 discount, which would still (and always) be taxed as ordinary income. But the shares immediately have a $50 "gain" (due to the look back). If sold right away at $100 (the then current market price), that $50 "gain" is taxed at short term rates (aka ordinary income rates). But if they hold the stock for a > year, the $50 (and any additional gains) would then become "long term" gains.
...
Close, but not quite. If sold as a disqualifying disposition, then the $55 discount is taxable as wage income (right now same rates as STCG). In a qualifying disposition, only the $5 is wage income. There are a few example here: https://turbotax.intuit.com/tax-tips/in ... /L8NgMFpFX.
I thought that's what I said... But you definitely said it more clearly! :beer
Thanks, just wanted to be clear about wage income vs STCG. Rates are the same, but sometimes the type can make a difference.
international001
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Re: ESPP vs RSU - what to sell first

Post by international001 »

You can play tax games with ESPP
There is not point in holding RSUs more than you have to, except...


When you have to sell for a loss during the 30 days window while you are buying the same stock (and automatic ESPP buying qualifies)

It will safe you hassle if you don't have to adjust the cost basis of your ESPP shares (wash sale rules). I prefer to wait after the 30 day window is over, or just sell the RSU as an limit order to guarantee I don't have a loss

Anybody knows about automatic RSU sell programs? I'm told they are offered by some companies.
AnEngineer
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Re: ESPP vs RSU - what to sell first

Post by AnEngineer »

international001 wrote: Wed Jul 21, 2021 9:22 am It will safe you hassle if you don't have to adjust the cost basis of your ESPP shares (wash sale rules). I prefer to wait after the 30 day window is over, or just sell the RSU as an limit order to guarantee I don't have a loss
If worried about the impact of the change, sure. But if you're worried about the tax form impact of having to adjust the cost basis of ESPP shares, you have to do that anyways to capture the wage income portion properly.
international001
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Re: ESPP vs RSU - what to sell first

Post by international001 »

AnEngineer wrote: Wed Jul 21, 2021 9:33 am
international001 wrote: Wed Jul 21, 2021 9:22 am It will safe you hassle if you don't have to adjust the cost basis of your ESPP shares (wash sale rules). I prefer to wait after the 30 day window is over, or just sell the RSU as an limit order to guarantee I don't have a loss
If worried about the impact of the change, sure. But if you're worried about the tax form impact of having to adjust the cost basis of ESPP shares, you have to do that anyways to capture the wage income portion properly.
Not following.. When you sell your ESPP you have all the info you need in the 3922 form
IF you sold any stock on the same window for a loss, now you have to keep track of that on top of anything else
AnEngineer
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Re: ESPP vs RSU - what to sell first

Post by AnEngineer »

international001 wrote: Wed Jul 21, 2021 6:22 pm
AnEngineer wrote: Wed Jul 21, 2021 9:33 am
international001 wrote: Wed Jul 21, 2021 9:22 am It will safe you hassle if you don't have to adjust the cost basis of your ESPP shares (wash sale rules). I prefer to wait after the 30 day window is over, or just sell the RSU as an limit order to guarantee I don't have a loss
If worried about the impact of the change, sure. But if you're worried about the tax form impact of having to adjust the cost basis of ESPP shares, you have to do that anyways to capture the wage income portion properly.
Not following.. When you sell your ESPP you have all the info you need in the 3922 form
IF you sold any stock on the same window for a loss, now you have to keep track of that on top of anything else
Yes, you have extra info. My point was that you have correct the basis from that listed on your 1099B (which is sent to the IRS) for ESPP shares anyways. In my experience, my broker handles the wash sale adjustments automatically correctly.
international001
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Re: ESPP vs RSU - what to sell first

Post by international001 »

AnEngineer wrote: Wed Jul 21, 2021 6:54 pm
Yes, you have extra info. My point was that you have correct the basis from that listed on your 1099B (which is sent to the IRS) for ESPP shares anyways. In my experience, my broker handles the wash sale adjustments automatically correctly.
Ok.. if you trust your broker and you are sure you won't ever use another broker to buy/sell that company stock, then you will be fine
AnEngineer
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Re: ESPP vs RSU - what to sell first

Post by AnEngineer »

international001 wrote: Thu Jul 22, 2021 4:40 am
AnEngineer wrote: Wed Jul 21, 2021 6:54 pm
Yes, you have extra info. My point was that you have correct the basis from that listed on your 1099B (which is sent to the IRS) for ESPP shares anyways. In my experience, my broker handles the wash sale adjustments automatically correctly.
Ok.. if you trust your broker and you are sure you won't ever use another broker to buy/sell that company stock, then you will be fine
Why would you ever be trading your company's stock at multiple brokerages simultaneously?
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drumboy256
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Re: ESPP vs RSU - what to sell first

Post by drumboy256 »

Sell both when you can. Stock options, depending on vesting, sell as soon as you can.
Promise is one thing. Fulfilling that promise is quite another. - Sir Alex Ferguson | VTWAX + HFEA + LTT and chill.
international001
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Re: ESPP vs RSU - what to sell first

Post by international001 »

AnEngineer wrote: Thu Jul 22, 2021 8:04 am
international001 wrote: Thu Jul 22, 2021 4:40 am
AnEngineer wrote: Wed Jul 21, 2021 6:54 pm
Yes, you have extra info. My point was that you have correct the basis from that listed on your 1099B (which is sent to the IRS) for ESPP shares anyways. In my experience, my broker handles the wash sale adjustments automatically correctly.
Ok.. if you trust your broker and you are sure you won't ever use another broker to buy/sell that company stock, then you will be fine
Why would you ever be trading your company's stock at multiple brokerages simultaneously?
You may want to switch brokers, because you realize the other broker is better or has lower fees
I guess also that if you leave the company you can keep your stocks there.
international001
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Re: ESPP vs RSU - what to sell first

Post by international001 »

drumboy256 wrote: Thu Jul 22, 2021 8:26 am Sell both when you can. Stock options, depending on vesting, sell as soon as you can.
HOw is the math for stock options?
If you have an option to buy at $20 and market price is at $21, isn't it worth to wait? IF price goes down by a $1, you don't loose anything, if price goes up just by $1, you earn 100% more.

Usually the price at what you buy the options embeds all these risks and benefits, but since you didn't have to pay for them you may have a greater benefit/risk that if it was just stock.
AnEngineer
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Re: ESPP vs RSU - what to sell first

Post by AnEngineer »

international001 wrote: Fri Jul 23, 2021 6:43 am
AnEngineer wrote: Thu Jul 22, 2021 8:04 am
international001 wrote: Thu Jul 22, 2021 4:40 am
AnEngineer wrote: Wed Jul 21, 2021 6:54 pm
Yes, you have extra info. My point was that you have correct the basis from that listed on your 1099B (which is sent to the IRS) for ESPP shares anyways. In my experience, my broker handles the wash sale adjustments automatically correctly.
Ok.. if you trust your broker and you are sure you won't ever use another broker to buy/sell that company stock, then you will be fine
Why would you ever be trading your company's stock at multiple brokerages simultaneously?
You may want to switch brokers, because you realize the other broker is better or has lower fees
I guess also that if you leave the company you can keep your stocks there.
I could see that if you have outstanding ESPP shares AND you leave that employer, you might move the shares for simplicity (to consolidate). If you do this you would want to track cost basis info in case it doesn't transfer over correctly (ESPP discount likely doesn't, not sure about wash sales). But if you're still with an employer, stock trades are $0 most places now, so I don't see why you'd move the shares.

The only scenario I could see causing extra work is if you move some shares to another broker, sell there, and purchase at the original broker causing a wash sale that neither broker is aware of. But given the above, I don't know why you'd ever put yourself in that situation.
SnowBog
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Re: ESPP vs RSU - what to sell first

Post by SnowBog »

AnEngineer wrote: Fri Jul 23, 2021 12:42 pm
international001 wrote: Fri Jul 23, 2021 6:43 am
AnEngineer wrote: Thu Jul 22, 2021 8:04 am
international001 wrote: Thu Jul 22, 2021 4:40 am
AnEngineer wrote: Wed Jul 21, 2021 6:54 pm
Yes, you have extra info. My point was that you have correct the basis from that listed on your 1099B (which is sent to the IRS) for ESPP shares anyways. In my experience, my broker handles the wash sale adjustments automatically correctly.
Ok.. if you trust your broker and you are sure you won't ever use another broker to buy/sell that company stock, then you will be fine
Why would you ever be trading your company's stock at multiple brokerages simultaneously?
You may want to switch brokers, because you realize the other broker is better or has lower fees
I guess also that if you leave the company you can keep your stocks there.
I could see that if you have outstanding ESPP shares AND you leave that employer, you might move the shares for simplicity (to consolidate). If you do this you would want to track cost basis info in case it doesn't transfer over correctly (ESPP discount likely doesn't, not sure about wash sales). But if you're still with an employer, stock trades are $0 most places now, so I don't see why you'd move the shares.

The only scenario I could see causing extra work is if you move some shares to another broker, sell there, and purchase at the original broker causing a wash sale that neither broker is aware of. But given the above, I don't know why you'd ever put yourself in that situation.
Not sure if it's universal for ESPP, or just how my plan works, but I can't transfer shares until they reach the "qualified" period (something like 1.5 - 2 years, forget exactly). Not even between different accounts within the same brokerage.

So someone who switched brokerages - and hadn't been selling all of their shares - could end up having more than one brokerage holding shares for a period of time...

For myself, given the timing of ESPP, RSU, etc. - I basically can't sell employer stock at a loss - effectively no 30 day window where I could claim the loss...
AnEngineer
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Re: ESPP vs RSU - what to sell first

Post by AnEngineer »

SnowBog wrote: Fri Jul 23, 2021 1:11 pm
AnEngineer wrote: Fri Jul 23, 2021 12:42 pm
international001 wrote: Fri Jul 23, 2021 6:43 am
AnEngineer wrote: Thu Jul 22, 2021 8:04 am
international001 wrote: Thu Jul 22, 2021 4:40 am

Ok.. if you trust your broker and you are sure you won't ever use another broker to buy/sell that company stock, then you will be fine
Why would you ever be trading your company's stock at multiple brokerages simultaneously?
You may want to switch brokers, because you realize the other broker is better or has lower fees
I guess also that if you leave the company you can keep your stocks there.
I could see that if you have outstanding ESPP shares AND you leave that employer, you might move the shares for simplicity (to consolidate). If you do this you would want to track cost basis info in case it doesn't transfer over correctly (ESPP discount likely doesn't, not sure about wash sales). But if you're still with an employer, stock trades are $0 most places now, so I don't see why you'd move the shares.

The only scenario I could see causing extra work is if you move some shares to another broker, sell there, and purchase at the original broker causing a wash sale that neither broker is aware of. But given the above, I don't know why you'd ever put yourself in that situation.
Not sure if it's universal for ESPP, or just how my plan works, but I can't transfer shares until they reach the "qualified" period (something like 1.5 - 2 years, forget exactly). Not even between different accounts within the same brokerage.

So someone who switched brokerages - and hadn't been selling all of their shares - could end up having more than one brokerage holding shares for a period of time...

For myself, given the timing of ESPP, RSU, etc. - I basically can't sell employer stock at a loss - effectively no 30 day window where I could claim the loss...
My point is that I don't see why anyone who is still employed with a company (and getting more ESPP and/or RSU shares) would WANT to move shares in today's environment. Because you're going to get more shares, you have to keep the account open. Because trading fees are $0, there won't be a cost advantage for moving the shares. If you prefer to use another brokerage for your main taxable investing, that may make sense, but I don't see the point in moving over ESPP and RSU shares. Just move the cash when you sell.
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drumboy256
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Re: ESPP vs RSU - what to sell first

Post by drumboy256 »

international001 wrote: Fri Jul 23, 2021 6:48 am
drumboy256 wrote: Thu Jul 22, 2021 8:26 am Sell both when you can. Stock options, depending on vesting, sell as soon as you can.
HOw is the math for stock options?
If you have an option to buy at $20 and market price is at $21, isn't it worth to wait? IF price goes down by a $1, you don't loose anything, if price goes up just by $1, you earn 100% more.

Usually the price at what you buy the options embeds all these risks and benefits, but since you didn't have to pay for them you may have a greater benefit/risk that if it was just stock.
The way I look at it is why put my faith into a company that could risk going down further? If you work at a Fortune 500 company that offers said RSU's, Options, etc. are generally at risk for cyclical trading cycles that may or may not be favorable. Generally speaking, most of the Bogleheads will advise on making sure that your tax situation is "favorable" to exercise those options. Either way, your mileage may vary, but I'd rather have the cash for my EF or VTi in taxable.
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MTZ
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Re: ESPP vs RSU - what to sell first

Post by MTZ »

this is probably oversimplifying and really it's all the same bucket in the end but psychologically the ESPP is coming right out of your paycheck.. It's direct compensation. Sell it. RSU is also compensation but since it doesn't come out of your paycheck directly it's easier (in the mind) to hold RSU shares IMO. In reality, you should pay attention to what the posters above are saying but I've always felt compelled to sell ESPP quickly for this reason (not so with RSU).
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drumboy256
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Re: ESPP vs RSU - what to sell first

Post by drumboy256 »

MTZ wrote: Sat Jul 24, 2021 12:49 am this is probably oversimplifying and really it's all the same bucket in the end but psychologically the ESPP is coming right out of your paycheck.. It's direct compensation. Sell it. RSU is also compensation but since it doesn't come out of your paycheck directly it's easier (in the mind) to hold RSU shares IMO. In reality, you should pay attention to what the posters above are saying but I've always felt compelled to sell ESPP quickly for this reason (not so with RSU).
I would agree. The contrarian would argue--- the company may have been around for 15-20-30 or even 50 years--- do you risk holding RSU's of a company that may not be there in 50 years when you retire? Something to think about.
Promise is one thing. Fulfilling that promise is quite another. - Sir Alex Ferguson | VTWAX + HFEA + LTT and chill.
international001
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Re: ESPP vs RSU - what to sell first

Post by international001 »

AnEngineer wrote: Fri Jul 23, 2021 12:42 pm
I could see that if you have outstanding ESPP shares AND you leave that employer, you might move the shares for simplicity (to consolidate). If you do this you would want to track cost basis info in case it doesn't transfer over correctly (ESPP discount likely doesn't, not sure about wash sales). But if you're still with an employer, stock trades are $0 most places now, so I don't see why you'd move the shares.

The only scenario I could see causing extra work is if you move some shares to another broker, sell there, and purchase at the original broker causing a wash sale that neither broker is aware of. But given the above, I don't know why you'd ever put yourself in that situation.
Yes, for simplicity I would leave the outstanding shares at the same broker. If you have one adjusted cost basis and you transfer stocks to another broker, that adjustment may not transfer right.
In my case, I have ESPPs on 2 brokers now (switch from one to another one), so better to avoid wash sales.
It's not a big deal anyway, just set a limit order to make sure the you sell with a gain. Or you have automatic RSU sales?
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