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How a Tax Loophole Is Helping Silicon Valley Workers Save Millions
When Kay Luo joined LinkedIn in 2006, she received a grant of shares with a value of 12 cents each. The company went public in 2011 at $45 a share. By the end of the first day of trading, the price had doubled, and she began the process of selling her stock.
"It was more money than I've ever known," said Ms. Luo, who is in her 40s and has retired from the tech industry. "I felt very unsophisticated to manage the wealth. I thought the right thing to do was hire a fancy accountant."
Her new accountant helped with common techniques to minimize her tax on the windfall, like trusts, gifts and philanthropy. But she said he missed what has become one of the great windfalls in Silicon Valley: a provision in the tax code that allows employees at small companies to receive tens of millions of dollars in stock gains tax-free.
Ms. Luo said she was shocked that her accountant had failed to tell her about this: "It was hundreds of thousands of dollars we overpaid," she said.
The tax code provision addresses what's called qualified small-business stock. It says that people who are invested in a company valued under $50 million are eligible to exclude from their taxes $10 million or 10 times their investment, whichever is higher. It can be used by employees at start-ups who are given stock as part of their compensation plans.
"This is just an incredible way to exclude a large amount of income," said Raymond L. Thornson, managing director at the accounting firm Andersen Tax in San Francisco. "What makes this unique is most of the opportunities to save on taxes are to give money away or deduct your mortgage."
(Score: 3, Touché) by looorg on Sunday July 14 2019, @07:46PM (4 children)
Isn't that much every western (and probably others) nations national sport? Trying to dodge as much taxes as they possibly can while still being upset when other people do it to (and better then they did)?
(Score: 2) by The Mighty Buzzard on Sunday July 14 2019, @09:42PM (2 children)
Well, of course. Most of us just don't have the levels of hypocrisy necessary to also demand higher taxes that we have no intention of paying.
My rights don't end where your fear begins.
(Score: 1) by Ethanol-fueled on Sunday July 14 2019, @10:20PM (1 child)
Or the levels of hypocrisy required to pretend to care about the homeless while lobbying against affordable housing, because affordable housing is bad for already-ridiculous property values here. I'm still waiting for Jesus to come back and turn the inhabitants of San Francisco and L.A. into salt pillars.
(Score: 3, Insightful) by PartTimeZombie on Monday July 15 2019, @12:32AM
If Jesus gave a toss about hypocrites then he would be too busy smiting arseholes like Pat Robertson, Creflo Dollar, and all those other prosperity gospel grifters.
(Score: 3, Insightful) by c0lo on Monday July 15 2019, @01:19AM
It is... for some values of "every western nations"
E.g. others are happy to reduce the cost of beancounters by outsourcing the health care and education to the govt. Weird things happen then, like free tertiary education [wikipedia.org] or the best education system [bigthink.com]. Like, I don't know, maybe it helps them to lower the cost and time (loss of opportunity) when it comes to recruiting talent?
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford