When cruise employees sell their shares, do they get capital gain or is it considered normal comp? I know it’s not a public company so not sure how the price is determined!
One of the tricks of the trade is the Section 83B election. This allows you to pay tax on equity at its "fair market value" (which can be very subjective, unlike real time pricing of public securities), at the time it is assigned (rather than when it really transfers at the time of vesting). This skips recognizing it as income and yes, you would pay long term capital gains on the difference on the tax year when it is sold.
When I was issued my RSU terms when I started at Cruise, they claimed the price was $29/share. GM was propping the price up to that point even if the 3rd party valuation, which was secret, was less than $29. So early exercise would have been a bad deal. The price has only decreased since then. Besides, with half my income as RSUs, it’s not financially feasible to pay the tax early. This work better with options that are granted at pennies (or less) per share and early exercise is trivial cost-wise.
Hijacking for another question. How do they determine the price per share during the next liquidity event? Per last fund raising valuation before the incident? Or an arbitrary price determined by the GM board of directors? Surely most shareholders will dump their share. Will this crash the price per share like in a stock exchange?
They claim there is a secret 3rd party service suggesting the price but GM can override and pick whatever price they pull out of a hat.
Thx. Best of good luck!! (if you decide to sell)
normal cap if you sell same year. And the RSU value keeps decreasing so you won’t get capital gain at all.
when the shares vest, it’s as if we received income at the valuation price x number of shares. The share price is re-evaluated every quarter by a third party, not sure what exactly they use to determine but it takes a lot into account
but to be clear, RLO was cancelled and we don’t know if it’s coming back…so it’s all paper money now
Right. Journalists were bad at the headlines. They didn’t reverse the decision.
The vesting event is what causes tax burden. Unrelated to the sale in this case.
Yes it will be taxed as capital gains/loss.
No. It’s income tax.
The keyword you missed is "sell".
The only thing taxed as capital gains is actual capital gains: the delay between acquisition price and sale price. VESTING is the same as normal W2 income, taxes via income tax on that income.
They cant sell their shares If they were public, they arent taxed til sale. When they sell, the value@vest would be taxed as ordinary W2 income, any gains are taxed as capital gains
We were able to sell until Q4. (RLO). The price is fixed per quarter, so if you are selling your vests every quarter, there's no capital gains, if you are selling your old holdings, you have capital gains/loss. Your stock vest would be considered income just like at a public company and establish your cost basis