20-171D 20-171D . . . Restricted Stock Plan under which a committee of Board of Directors sells shares of common stock to certain officers and senior employees at a price substantially below current market price. The shares are subject to following restrictions: (a) prohibition against any sale or other transfer and (b) obligation that participant (at corporation's option) must resell shares to corporation at price he paid for them if he ceases to be employed by corporation prior to expiration of from five to nine years after shares were sold to him, for reasons other than normal retirement, death, total disability or early retirement with consent of Board or committee. Except as otherwise provided, restrictions lapse as to 1/5 of aggregate number of participant's shares at expiration or each of fifth through ninth years after his purchase of such shares
California Restricted Stock Plan of Sundstrand Corp.
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FAQ
Qualified RSUs are taxed at either the long-term capital gains tax rate or your ordinary income tax rate, whichever is lower. For 2021, the long-term capital gains tax rates are 0%, 15%, or 20%, depending on your taxable income. Ordinary income tax rates range from 10% to 37%.
So how do RSUs get taxed? You'll owe taxes on your equity compensation twice, at vesting and when you sell. Vesting - On your vesting date, you automatically own shares of the company stock. The stock has a fair market value which is your cost basis.
How is the amount of the employer's tax deduction for restricted stock determined? The amount of the deduction equals the ordinary income that is recognized by the employees.
RSU tax at vesting date is: The # of shares vesting x price of shares = Income taxed in the current year. If held beyond the vesting date, the RSU tax when shares are sold is: (Sales price ? price at vesting) x # of shares = Capital gain (or loss)
When an employee receives Restricted Stock Units, they have an interest in the company's equity, but the units have no tangible value until they vest. Once the RSUs vest, the employee can keep, sell, or transfer the shares, just like any other stock. Companies use RSUs as a form of employee compensation or bonus.
In almost all situations, it will be in your best interest to sell RSUs immediately upon vesting. As mentioned above, there is no tax benefit to holding on to RSU shares. Yes, hanging on to them for a year before selling allows you to pay long term capital gains rates. But that's true for any common stock.
The per share cost basis of your RSU's in any lot is the compensation created by the vesting (which is reported on your W-2) divided by the GROSS number of shares you received in that lot.
Resigning before your RSUs have vested is a tough pill to swallow. Usually, you'll lose all the RSUs that have not yet vested at the time of your resignation. They'll be forfeited back to the company, and you'll walk away with nothing for those unvested units.