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View Diary: "Fix the Debt" CEOs Enjoy Taxpayer-Subsidized Pay (108 comments)

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  •  So this part of the report is flat out false: (6+ / 0-)
    Recommended by:
    gravlax, doc2, VClib, Kimbeaux, nextstep, Dburn
    If executives hold onto their shares for more than two years after the grant date and more than a year after the exercise date — the point at which  the stock is transferred to the executive —  they pay only the long-term capital gains tax rate on this income.
    I know tax is complicated, but it's not that complicated.  The piece is describing "incentive stock options."   ("ISOs") Incentive stock options are pretty rare birds in exec comp for two reasons:

    - there's no deduction for the company.
    - Grants of ISOs are limited to $100,000 vesting per year.  

    So if we're talking about companies taking big deductions (over and above our 162(m) limit of $1MM) for big executive pay, we're pretty clearly not talking about ISOs, but rather talking about "nonqualified stock options" which, as noted above, are W-2 wages taxed at top marginal rates and subject to our 2.35% medicare tax on taxpayer and 1.45% on the employer.

    •  2 year rule (6+ / 0-)
      Recommended by:
      gravlax, marleycat, caul, Kimbeaux, elwior, 3goldens

      Where do you get the idea that ISO's are rare?.  I'm a CPA and see them quite often even with lower level executives.

      The better I know people, the better I like my dog.

      by FTL BILLY on Thu May 02, 2013 at 05:40:35 AM PDT

      [ Parent ]

      •  *Only* w/ lower level execs. (4+ / 0-)
        Recommended by:
        gravlax, Kimbeaux, aguadito, nextstep

        Remember, you're limited to $100K / year, so the only execs that will really get any benefit will be lower level execs.

        Rare may not have been the right word, but the overwhelming majority of option awards are NQSOs.

        At any rate, since the article is griping about deductible comp, they can't be talking about ISOs.  

      •  FTL - the $100K cap (1+ / 0-)
        Recommended by:
        johnny wurster

        restricts the granting of ISOs to junior executives of Fortune 1000 companies. However, startups can use ISOs for senior executives because the common stock has a very modest value, particularly if there is institutional investor preferred stock in the capitalization.

        "let's talk about that"

        by VClib on Thu May 02, 2013 at 10:22:39 AM PDT

        [ Parent ]

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