OK

Screen grab from the official IRS site.
Corporate executives are paid differently than the rest of us.  

There's a large industry dedicated to "Executive Compensation."  How to pay Top Executives More.  How to "design" Top Executive Pay so it isn't taxed.

Consider just stock options.

If you are granted a statutory stock option (1) you generally do not include any amount in your gross income when you are granted or exercise the option. However, you may be subject to Alternative Minimum Tax in the year you exercise an ISO. . . .  You have taxable income or deductible loss when (2) you sell the stock you received by exercising the option. You generally treat this amount as a capital gain or loss.

http://www.irs.gov/...

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Note the important parts:

1. No tax on the grant;
2. Capital gain on the sale.

Executive stock options often just allow Top Executives to "exercise the option" by without buying the stock.  When the Top Executive wants money the corporation "cashes" out the option by handing the Top Executive a check for the difference between the "offer price" and the "current price."

BUT WHAT IF THE PRICE GOES DOWN?  

No problemo.

Top Executives get the Board to ask shareholders to vote to reprice older option plans lower.  VoilĂ .  Ignorant shareholders always vote YES, and Top Executives get their "stock option bonuses" even if their own mismanagement was what whacked the stock price.

Then there's that $70 million Gulfstream.  Would be compensation to take it for a joy ride to the Caymans, except "for security reasons" the Board REQUIRES the Top Top Executive to "fly only" on the corporate jet.  Even joy rides then cost the Exec just the equivalent, which is "First Class Fare."

Yeah, right.  

Didn't easily find how just how expensive it is to own, crew, fuel, hanger, and maintain a nice $70 million 800 mph Gulfstream VI.  

But, hey, an "outmoded" Gulfstream IV can fly you to the Caymans for a mere $5,700 an hour.

http://www.executivejetmanagement.com/...

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