The CEOs that take zero or low salaries are not "good" they do it for capital gains tax rates?

[Anonymous]

I was thinking about this the other day.

All those CEOs that take a dollar salary or very low salaries in favor of company stock are actually only going to pay taxes on long term capital gains if they hold on to the stock for a year before selling.

I wish I could get paid in stock, the first year would suck but starting after that you could just sell what I need as salary and only pay the capital gains rate.

Does that sound right or am I missing something?

[Anonymous]

No. It is more complicated than that. Assuming you are talking about restricted stock, is there an 83(b) election? If not, ordinary income is paid as vested. If so, you pay it up front.

[Anonymous]

You're missing the fact that they are not getting stock grants, but stock options.

Therefore, they will only profit if the stock actually rises. If the stock stays flat or goes down, they get zip.

So its an incredible incentive -- kind of like a sales person who gets paid only commissions.

[Anonymous]

Anonymous wrote:No. It is more complicated than that. Assuming you are talking about restricted stock, is there an 83(b) election? If not, ordinary income is paid as vested. If so, you pay it up front.

This. Either way, it's ordinary income.

[Anonymous]

Anonymous wrote:

Anonymous wrote:No. It is more complicated than that. Assuming you are talking about restricted stock, is there an 83(b) election? If not, ordinary income is paid as vested. If so, you pay it up front.

This. Either way, it's ordinary income.

Correct. There's no preferential tax treatment there. OP clearly doesn't understand how things work so probably shouldn't be opining about them.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:No. It is more complicated than that. Assuming you are talking about restricted stock, is there an 83(b) election? If not, ordinary income is paid as vested. If so, you pay it up front.

This. Either way, it's ordinary income.

Correct. There's no preferential tax treatment there. OP clearly doesn't understand how things work so probably shouldn't be opining about them.

And OP wasn't, rather OP came and specifically asked others for an explanation. Seems pretty damn reasonable.

[Anonymous]

Can anyone explain if it would be possible to avoid income taxes in the scenario I laid out? Like only paying capital gains tax?

[Anonymous]

OP is right in a number of ways, this is precisely why Warren Buffet magically pays less in taxes than his secretary.

[Anonymous]

Anonymous wrote:Can anyone explain if it would be possible to avoid income taxes in the scenario I laid out? Like only paying capital gains tax?

If you have a carried interest.

[Anonymous]

Anonymous wrote:OP is right in a number of ways, this is precisely why Warren Buffet magically pays less in taxes than his secretary.

He has a lower effective tax RATE, he does not pay less in taxes. And Forbes did an analysis that estimated that based on the tax rate she was paying she had to be making a minimum of $200,000. So not CEO level, but not what people might typically think of as a secretary salary.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Can anyone explain if it would be possible to avoid income taxes in the scenario I laid out? Like only paying capital gains tax?

If you have a carried interest.

Yeah, pretty much this. The income would have to have the character of capital gains. Executive stock options don't.

Carried interest with capital gains treatment wouldn't be realized unless an asset is sold, of course.