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Old 08-15-2022, 05:36 AM
815C 815C is offline
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Default Getting taxed twice on a stock bonus?

About 10 years ago I was given some company stock as a bonus. At that time they took about 35% of the shares away to pay tax.

Now the company is being purchased by another company and all shareholders will have their shares purchased and liquidated. I'm being told than when this happens I will have to pay tax on this payout.

Seems I'm being taxed twice for these shares, once when they were given to me and now a second time when they are being sold.
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Old 08-15-2022, 06:00 AM
QuestionMark QuestionMark is offline
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Default Getting taxed twice on a stock bonus?

I’m not a tax attorney, but, I believe when the stock was first given to you by the company it was considered income from the company and they withheld the first withholding part of the stock so they could then pay your income tax from the income from when they gave you the stock value. That is a pretty standard practice. This second time you will need to pay tax on it is from the income that the stock went up in price value since when you first received it as income. The first time was the initial value of the stock when you received it. The second time is the present profit on the stock that you experienced since receiving it. In other words the second time tax is tax on the difference between the stock price now and when you initially received it or in other words on the profit on it since you first received it. The first time it was tax on the income or difference between 0 and the price of the stock when you initially received it as income.

Again I’m not a tax attorney, but that is the gist from my perspective. If for any reason the stock is presently at a lower price or value than when you first received it, then there is no profit since you received it since you first owned it and a loss occurred which may also be shown on you tax forms. Either way, I suggest consulting a tax attorney or accountant or H& R Block or equivalent or self study up on tax directions when you file on how to properly show the profit or loss from the stock ownership on Schedule D, capital gains, tax schedule, etc. forms. My explanation is merely a layman one.

It is standard practice on a stock option or bonus in stock to pay income taxes on it when a stock is given to you as income and then to pay taxes on the income made on the stock from when the stock was given to you.

ie. You had no stock. A $30 in stock value was given to you. $10 of the stock value was initially paid in income taxes leaving you with $20 in stock value. That stock value went up to $40 over time from the initial $20 value you owned. Now tax is due on the new $20 income value you made from the stock value now that it’s being sold.

Makes sense.

I hope this helps.

QM aka “ Jazzman” Jeff

Last edited by QuestionMark; 08-15-2022 at 06:16 AM.
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Old 08-15-2022, 06:05 AM
egordon99 egordon99 is online now
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QM is exactly correct. I get a large amount of compensation via stock grants each year and I am very familiar with how it works.

In a nutshell, you get shares withheld when you get the grant since the shares are considered income (this amount would show up on your W2)

And then when you sell the stocks, you get taxed like when you sell any stock (assuming you "gained" value)

Disclaimer: I am not an attorney and this is not legal advice.
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Old 08-15-2022, 06:10 AM
815C 815C is offline
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Ah! Thanks guys! That clears it up!
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Old 08-15-2022, 06:26 AM
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But I am guessing it is a capital gains tax on the increased value only
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Old 08-15-2022, 06:43 AM
Chas007 Chas007 is offline
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I agree with the OP.

If I am elected President I will, by executive order, make it so that you are only taxed when you liquidate an asset into cash. Thank you and remember I need your vote and you need me to be President.

The preceding was not paid for and I'm not really sure if I approve of this message, but I posted it anyway.
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Old 08-15-2022, 06:46 AM
bsman bsman is offline
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If you've held the stock for more than a year (not sure about the exact period these days) it will be taxed as long-term capital gains and not as regular income, so the tax rate will most likely be much less - 0%,15%, or 20% - than your regular income tax rate. Also, only the net gain will be taxed, not the total value of your shares. Although I am also not a tax attorney, I WAS a CPA (although I never did taxes for a living).
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Old 08-15-2022, 07:33 AM
Dirk Hofman Dirk Hofman is online now
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Quote:
Originally Posted by 815C View Post
About 10 years ago I was given some company stock as a bonus. At that time they took about 35% of the shares away to pay tax.

Now the company is being purchased by another company and all shareholders will have their shares purchased and liquidated. I'm being told than when this happens I will have to pay tax on this payout.

Seems I'm being taxed twice for these shares, once when they were given to me and now a second time when they are being sold.
You’re probably getting taxed on capital gains, the amount of value the stock has gained since the grant was accepted.

EDIT: Ah, this has been answered of course. I think the long term gains start at 18 mos after grant acceptance.
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Old 08-15-2022, 08:57 AM
Maryc-k Maryc-k is offline
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Hire a licensed accountant to do your taxes, and look over the paperwork. It sounds like the purchasing company is doing a cash buy out, not a stock swap. Start planning your year end now with a tax pro. There may be some things that you can do to lessen the pain.
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Old 08-15-2022, 10:57 AM
buddyhu buddyhu is offline
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Quote:
Originally Posted by Maryc-k View Post
Hire a licensed accountant to do your taxes, and look over the paperwork. It sounds like the purchasing company is doing a cash buy out, not a stock swap. Start planning your year end now with a tax pro. There may be some things that you can do to lessen the pain.
One way to lessen the pain would be to sell some stock that has decreased in value (if you own some outside of a retirement account). The capital losses from selling any losers can offset the capital gain on the stock buyback. You might also investigate whether you can donate to a charity some of the stock that was granted to you before the company does the buyback; if so, you would get the full value of the stock as a donation and would not pay capital gains on any stock that is donated.
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Old 08-17-2022, 08:14 AM
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rllink rllink is offline
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Quote:
Originally Posted by buddyhu View Post
One way to lessen the pain would be to sell some stock that has decreased in value (if you own some outside of a retirement account). The capital losses from selling any losers can offset the capital gain on the stock buyback. You might also investigate whether you can donate to a charity some of the stock that was granted to you before the company does the buyback; if so, you would get the full value of the stock as a donation and would not pay capital gains on any stock that is donated.
I don't think in this circumstances the OP is in control of the sale. It sounds like it is one stock and it is connected to a corporate buy out. My wife had this same thing. She worked for a high tech company that got bought out. She had received stocks as a stock option and the new company bought them back during the buy out. As I remember, the stocks were worth less at the time of the buy out than they were when they were issued and we took a loss on them on our taxes, which at the time worked out quite well for us.
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Last edited by rllink; 08-17-2022 at 08:33 AM.
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