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Financial Planning / Tax Strategies


Subject:  Re: Restricted stock short term sale Date:  3/6/2014  2:08 PM
Author:  Wradical Number:  120383 of 130715

When the stock is granted it is considered income and when my broker sells and pays taxes the gains from the stock ceases to be earned income and is now capital gains. The money I earn from this stock cannot push me into a higher tax bracket even if it is sold prior to a year. Is this correct?


Not necessarily. The general rule is that the value of the stock is income to you (at ordinary income rates) when it is "substantially vested", which means when the restrictions lapse.

You MAY want to pay tax sooner rather than later by making a Section 83(b) election to include the value of the stock - or the bargain purchase element - in income now, and that makes the subsequent appreciation into capital gain. If you're paying for the stock, the income inclusion amount may be zero. But you still have to make the election. And the election is a separate document filed with the IRS, and is due 30 days after the receipt of the shares.

You should talk to an accountant. Chances are your HR dept. should have more details on this, too.

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