Qualified Small-Business Stock rule helps Silicon Valley workers save millions • Hacker News Board

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#61

Post by CalChris » Sun, Jul 14, 2019, 1:02 AM UTC

zaroth wrote: post #22

jandrese wrote: post #19

Earlier quoted context omitted.

So like Eric Schmidt could use this if he cashed out his Google options?

Probably. But it’s limited to the first $10mm of gains.

$10M per year.

(1) In generalIf the taxpayer has eligible gain for the taxable year from 1 or more dispositions of stock issued by any corporation, the aggregate amount of such gain from dispositions of stock issued by such corporation which may be taken into account under subsection (a) for the taxable year shall not exceed the greater of—

(A) $10,000,000 reduced by the aggregate amount of eligible gain taken into account by the taxpayer under subsection (a) for prior taxable years and attributable to dispositions of stock issued by such corporation, or

(B) 10 times the aggregate adjusted bases of qualified small business stock issued by such corporation and disposed of by the taxpayer during the taxable year.

https://www.law.cornell.edu/uscode/text/26/1202

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#62

Post by TuringNYC » Sun, Jul 14, 2019, 2:14 AM UTC

asr wrote: post #12

dang wrote: post #5

Earlier quoted context omitted.

Ok, we've replaced 'loophole' with the name of the thing above.

The New York Times headline uses the word “loophole.” It’s not appropriate to rewrite that headline simply because you don’t like it. If “loophole” were an incorrect choice of words it would not be in the headline. EDIT to add I understand moderation is a thankless job and thank you for doing it. But I disagree with this particular call.

Actually learning that the NYTimes calls this a “loophole” is much of the story for me — it is part of a growing anti-tech worker rhetoric. It is part of a similar narrative that tries to justify breaking up tech firms but conveniently ignores telco, pharma, insurance, etc.

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#63

Post by zaroth » Sun, Jul 14, 2019, 5:20 AM UTC

CalChris wrote: post #61

zaroth wrote: post #22

Earlier quoted context omitted.

Probably. But it’s limited to the first $10mm of gains.

$10M per year. (1) In generalIf the taxpayer has eligible gain for the taxable year from 1 or more dispositions of stock issued by any corporation, the aggregate amount of such gain from dispositions of stock issued by such corporation which may be taken into account under subsection (a) for the taxable year shall not exceed the greater of— (A) $10,000,000 reduced by the aggregate amount of eligible gain taken into a…

Not per year! Says so even in the text you quoted, "reduced by the aggregate amount ... for prior taxable years ..."

It's $10mm per entity, or 10x what you paid for the stock, whichever is greater.

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#64

Post by zaroth » Sun, Jul 14, 2019, 5:31 AM UTC

Finnucane wrote: post #29

zaroth wrote: post #20

Earlier quoted context omitted.

Progressive tax rates, the doubled standard deduction, child tax credit, EITC, and Medicaid expansion are all pretty sweet “loopholes” for those on the lower end of the AGI spectrum.

Yeah, it’s why everyone likes being poor.

Being poor sucks. But the absolute best thing about earning little to no income in a year is a) not paying taxes, followed by b) not paying for health insurance. Free visits to Whole Foods might be on the top 10?

If you don't earn any income for a few years, you might even be able to add on some free housing while you're at it. That's one I've never done personally.

Of course, it helps to have some savings to draw from during this time. Because most welfare programs just look at annual income now, and not assets. They used to look at assets, but in many states they no longer do.

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#65

Post by asr » Sun, Jul 14, 2019, 10:33 AM UTC

thaumasiotes wrote: post #27

asr wrote: post #12

Earlier quoted context omitted.

The New York Times headline uses the word “loophole.” It’s not appropriate to rewrite that headline simply because you don’t like it. If “loophole” were an incorrect choice of words it would not be in the headline. EDIT to add I understand moderation is a thankless job and thank you for doing it. But I disagree with this particular call.

> If “loophole” were an incorrect choice of words it would not be in the headline. Wow, that's... generous.

“Correct” here was not supposed to mean you must agree. As others have pointed out “loophole” is often in the eye of the beholder. But I mean to say that it’s not inaccurate to use the word loophole in such a way that a mod should change the title.

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#66

Post by betterunix2 » Sun, Jul 14, 2019, 11:22 AM UTC

zaroth wrote: post #58

betterunix2 wrote: post #56

Earlier quoted context omitted.

A classic example of "we didn't intend for people to do that when we wrote the law!" One of the costs of living in a rule-of-law society is that sometimes the law winds up working in unexpected ways.

What do you mean? Section 1202 was very explicitly amended as written to stimulate investment in small business. It is a huge incentive for Series AA and A investment, particularly for smaller early stage investors where it can effectively double the return. It’s a fantastic policy to help small business raise money and also retain top talent versus the Goliaths. There is nothing unintentional about Section 1202. The…

I was referring to your definition of what a loophole is and the example of that (forming an S corp to avoid payroll taxes).

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#67

Post by [deleted] » Sun, Jul 14, 2019, 2:48 PM UTC

zaroth wrote: post #63

CalChris wrote: post #61

Earlier quoted context omitted.

$10M per year. (1) In generalIf the taxpayer has eligible gain for the taxable year from 1 or more dispositions of stock issued by any corporation, the aggregate amount of such gain from dispositions of stock issued by such corporation which may be taken into account under subsection (a) for the taxable year shall not exceed the greater of— (A) $10,000,000 reduced by the aggregate amount of eligible gain taken into a…

Not per year! Says so even in the text you quoted, "reduced by the aggregate amount ... for prior taxable years ..." It's $10mm per entity, or 10x what you paid for the stock, whichever is greater.

[deleted]

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#68

Post by CalChris » Sun, Jul 14, 2019, 3:54 PM UTC

zaroth wrote: post #63

CalChris wrote: post #61

Earlier quoted context omitted.

$10M per year. (1) In generalIf the taxpayer has eligible gain for the taxable year from 1 or more dispositions of stock issued by any corporation, the aggregate amount of such gain from dispositions of stock issued by such corporation which may be taken into account under subsection (a) for the taxable year shall not exceed the greater of— (A) $10,000,000 reduced by the aggregate amount of eligible gain taken into a…

Not per year! Says so even in the text you quoted, "reduced by the aggregate amount ... for prior taxable years ..." It's $10mm per entity, or 10x what you paid for the stock, whichever is greater.

Yeah, I see your point. But I think the 10X is still yearly. For a founder, that might not be much. For a funder, that might be a considerable benefit.

  (B) 10 times the aggregate adjusted bases ... during the taxable year.

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#69

Post by supernova87a » Mon, Jul 15, 2019, 8:19 AM UTC

kreetx wrote: post #6

toomuchtodo wrote: post #4

How early of an employee would you need to be?

When you join the company needs to be valued less than $50 million (by the article), the price of the actual stock doesn't matter.

That is not correct. The rule applies if the value of the company __at the time of issuance (stock issuance)__ was less than $50m.

For most people at major companies that are going to go public, and got ISOs, this rule wouldn't help you. By the time a company goes public and stock is issued (not talking options here), everyone is hoping to be worth billions.