Re: Cost Basis for Stock Grant

On Mar 6, 7:29 am, "Shyster1040" <Shyster1...@xxxxxxxxxxxxxxxxx>
wrote:
""Shyster - ever get an RSU?

Read my reply.

Why do you answer questions without a clue?

js""

If you want to play nice, be nice; otherwise, f**k off.


First, I don't get paid for doing this and I have other things that need
doing, so not every question gets a perfect answer.

If you don't have the personal integrity to do your best, then why
bother at all?

Second, I can only work with the facts as described,

The facts as described were sufficient to indicate a high probability
of a standard RSU transaction. Have you ever gotten one or ever
provided RSU to your employees?

and this isn't a
face-to-face, so there's no getting the relevant facts out immediately.

This is how it was described:

"I received a stock grant (Not Option grant) and paid taxes at the
time of
the grant."

That is an RSU. Gross distributions is the number of RSUs times the
share value at vesting.

You wrote this: "The reason I ask is that it appears that the company
may have given you a grossed up payment in order to cover the income
taxes you would otherwise
have had to pay on receipt of the stock."

That is blatantly wrong. It's not "grossed up". What he got was a
certain number of shares and the company withheld an amount for tax
purposes.

Then you wrote this: "If the price per share amount was the fair
market value of the stock when you received it, then that is your
income amount from the shares, and is also your cost basis in the
shares."

That too is blatantly wrong. The two aspects of the transaction are
separate. The first is INCOME and the INCOME earned from the RSU is
equal to the GROSS DISTRIBUTION which is the share value at vesting
times the number of shares granted. The second is the capital gain/
loss of the retained shares at the time those shares are sold. In the
following paragraph you remark that the cost basis of the shares (and
hence the income per your own definition) is $3,445.97. That is
wrong. The reported taxable income is $5231.56.

You go on to post that you have no clue what the "residual amount"
refers to - "plus the "Residual Amount" of $67.49 (whatever that is).
"

And then you make this idiotic statement: Thus, as near as I can tell
from the facts you describe, your cost basis in the shares you
received in 2006 should be $3,445.97, not $5,231.56."

The cost basis is per share. In this case it is $82.285 less
brokerage fees for the buy and sell.

Third, once the OP make it clear(er) what his employer had done, the
substance of the answer was correct -

No, it was not. The fact that the numbers were close doesn't change
the fact that the answer you provided was wrong.

the employer gave the OP 42 shares
of stock,

No - the employee received 63.6 shares of stock.

along with a cash payment of about $67,

The $67 reflects the residual value of partial shares sold.

and then paid the
stereotypical tax due on that amount,

The employer withheld an estimated tax liability

which is income constructively
received.

The transaction is calculated according to a very simple paradigm.

It is irrelevant, from a tax perspective, whether the employer
obtained the cash used for the tax payment by dipping into its own pocket
or by "granting" the OP additional stock that it then immediately sold on
the market and used the proceeds to pay the tax gross-up.

It is not a gross up. Gross-up transactions are substantively
different.

In point of
fact, under substance, step-transaction, and constructive receipt
doctrines, the OP never received the additional stock that was used to
fund the tax payment.

Of course he did and it will show up on his brokerage 1099. The first
part of the grant was sold the same instance the grant vested so there
is no capital gain - period. The second part of the grant could well
have been sold at the same time and again there would not have been
any capital gain. The total value of the grant is subject to income
tax and the amount withheld reflects an estimate of the liability but
it is NOT necessarily the actual liability. The tax payment accrues
to the account of the employee and the gross distribution accrues to
the income side.

The employee could have opted to pay the estimated withholding from
his own resources rather than have the RSU shares sold to cover the
expected liability.

gees.

And if you don't think I'm playing nice, tough. I don't particularly
care for you but that's not a problem for me. What I find irritating
is when people like you try and give others advice but by their own
admission do so half assed and in the absence of knowledge. And if
that doesn't apply to you - why did you write: "not every question
gets a perfect answer" and "(whatever that is)"?

js

.

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