

Zuckerberg to Be Taxed at Lower Rate Than Most Facebook Employees - bmaeser
http://mashable.com/2012/02/07/zuckerberg-tax-rate/

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tnicola
Can someone explain why are different stock types in the states taxed at
different rates? What is the logic behind classification of some stocks as
income and some as capital assets?

I am quite knowledgeable in finance, but am Canadian and in Canada all stocks
are taxed as capital gains and all capital gains are taxed at 25%.

We do have a complication when it comes to distribuited dividends, but I
imagine so do the States.

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markchristian
I think the issue here is that stocks belong to the employee as soon as they
vest, whereas RSUs don't come into existence until the IPO, at which point
they're immediately sold. Since the employee never owns them prior to selling,
they count as a short-term capital gain.

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tnicola
Thanks. That's very interesting. I guess it's the same as something that we
call 'stock options'. You are granted a right to buy stock for the price it
would be when one starts working, but you can't really sell them or cash them
until the IPO. For example, if I started working for a company that would have
stock price of $2.00 if IPO happened today, they would grant me the right to
buy the stock at that price at IPO no matter what the stock price would be at
the time. It's called 'exercising' your option. So, if stocks were worth
$10.00 at IPO, I would have gained $8.00 on day 1.

However, even if you 'exercise' your stock options at IPO (buy stocks for the
price of the valuation when they were granted to you), you don't have to cash
in your stocks, which means that the gains would not be realized (and thus not
taxable) until you do.

The tax, however, would be the same as any other capital gains, which is 25%.
We do not care how long the gain took to realize, just the fact that the net
gain was positive. (You can carry capital losses from the previous years and
offset your positive capital gains when you have them.)

