For an extra $30MM in tax write-offs... because clearly she stands to make more taxable income than the $150MM in stock she donated: https://news.ycombinator.com/item?id=10844592.
There must be something I'm missing here. I've seen these kinds of schemes discussed before, but don't understand how they would work.
Can you imagine the optics of an active board member, of a multi-billion dollar company, profiting from said company -- she's on the board of -- buying the company she runs? Good grief that reeks.
She understood she couldn't take that money in good conscience. So, she got out in front of the optics for a small fee by "donating to charity." (I mean look at the comments here applauding her for donating her shares.)
When you donate $150MM in stock, not only do you dodge the $30MM capital-gains tax (at a 20% tax rate), you receive a tax write-off for the full market value of the stock when you donated: $150MM in this case. Which means, in any year, she can take $150MM in income taxed at say 55%, and pay $0 in taxes on it. Much better than the $82.5MM she'd originally owe. And it makes tax planning a lot easier -- you don't have to worry about timing.
All in all: $120MM net - $82.5MM write-off = $37.5MM total cost to her for shares she didn't even want -- for good reason.
Understand that I don't care. But I would've been more impressed if she had donated those shares to her employees...
Effectively she donated a bunch of money to a charity instead of the federal tax fund. Hopefully the charity is more efficient!
55% is greater than the maximum combined federal and state marginal income tax rate on normal income, and no one making that much does it as normal (mainly, labor) rather than long-term capital gains (which pays lower rates) income in the first place, because no one pays that kind of money for labor, you only make it by capital returns, so, no, she can't even in principal, and even if the tax rates were such that she could in principal, she still wouldn't be likely to be able to in practice.
Secondly, you understand that RSUs (restricted stock units) are taxed as normal W-2 income at the time of vesting, right! You pay capital-gains tax on any appreciation in value after said vesting -- should you choose to sell the stock.
You should probably stop spreading misinformation on topics you don't have experience in.
But it is, AFAICT, greater than the maximum marginal income tax rate [0]; since the deduction affects only income taxes and not other taxes on income, it is the maximum marginal income tax rate, not the maximum marginal rate of taxation on income, that is relevant.
> Secondly, you understand that RSUs (restricted stock units) are taxed as normal W-2 income at the time of vesting
Yes, I do. That doesn't change anything I said. People that are making hundreds of millions of dollars of income in a year aren't making it from RSU vesting, or any other source of income subject to regular income taxes.
[0] just barely; the maximum marginal income tax rate in any US jurisdiction seems to be 39.6% federal + 13.3% CA state + 1.5% SF local, or 54.4%.
And sure, use 54.4% instead of 55%. Don't miss the forest for the trees though.
[1]: http://www.cnbc.com/2017/04/28/google-ceo-sundar-pichais-com...
[2]: http://money.cnn.com/2015/10/14/technology/twitter-omid-kord...
[3]: http://www.marketwatch.com/story/googles-sundar-pichai-is-li...
[4]: https://www.sec.gov/Archives/edgar/data/1288776/000130817913...
[5]: https://www.sec.gov/Archives/edgar/data/1652044/000130817916...
A simplified example, assuming one year of income from the shares, and one year of $150mm income from Google.
### Keep the shares:
Year1 = $150 - ($150 * 0.2) => $120
Year2 = $150 - ($150 * 0.55) => $67.5
Year1 + Year2 => $187.5
### Donate the shares:
Year1 = $150 - $150 - $0 => $0
Year2 = $150 - $0 => $150
Year1 + Year2 => $150
The first law of tax is that it is always better to have more money than less money. I could be wrong here, but I can't seem to find a way that you come out with more money by giving it away (ignoring donations to your own dodgy charity). I'm a big proponent of charity giving, but I don't see a way to make it turn a profit.
- https://www.bloomberg.com/view/articles/2014-12-09/deutsche-... - https://www.bloomberg.com/view/articles/2014-06-27/texas-bil...
The point was never for her to come out ahead, just less behind.
Why does this matter?
I was simply pointing out that she achieved exactly what she wanted. Better optics. :)
People commending her and commenting how amazing, how selfless, how fantastic it is that she donated all her proceeds to charity.
Understand that her primary motivation in donating was the write-off, not charity.
Otherwise, if she was feeling so chummy, why didn't she instead divide her almost 50% share among the employees that helped build her company? Hint: there's no write-off for that.
and you consider it bad because she could have chosen paying those 30m taxes and keeping the rest (instead of donating it) ?
The net "loss" to her was $37.5MM for shares she couldn't even use in good conscience in the first place (think team morale, public optics, etc.)
She was an active Google board member when they bought her company. That doesn't exactly look good to the public or to the team.
Note: She was an active Google board member when they bought her company. That's not how boards are supposed to work generally.