r/investing Mar 17, 04:21 AM
RSU vests at ATH. Sell-to-cover executes down 15%; is marked as wash sale. What is my tax liability, and how badly did I get hosed? I've done a bit of research into this, but this is a challenging problem to wrap my head around. This is my second RSU vesting event. The company didn't sell-to-cover last year, and the stock price back then was super low so I didn't really worry about the taxes anyway. I got a couple thousand which is less than my OT which doesn't get withheld correctly anyway, so I'm ready for it. Otherwise, I generally have not triggered any wash sales on my other trades so I'm not well-versed in the mechanics.
So my understanding is that at vest, the cost basis ($X) is immediately regular (eg W2) taxable income. With Sell-to-cover, shares are sold to earn the tax liability, or something like 0.32X. However, to make up for the dropped share cost, they actually sell something like 37% of my shares.
So now the tax-covering sales are listed as wash sales, because they are tied to...essentially their own basis. Otherwise, I don't carry any significant short-term losses, though I do have some long-term I could harvest. On the other hand, I mostly buy and hold, so most of my gains are long term. I'd hate to end up offsetting long term gains with short term losses.
The stock has been doing well, and it has partially recovered some of what was lost. With the caveat of real risk in share price, I'm inclined to hold these shares just until they recover some short term gains that would use up some of the short term losses that the forced sell incurred.
Is that totally foolish to take on the concentrated risk to optimize taxes? Are losses on RSUs immediately after vesting a normal thing? Does everyone just eat the taxes and the loss? It is frustrating because I only got to see the shares and the aftermath a week after the vesting event. Then its like "WTF, I didn't realize the price was ever that high (or low) last week!"
submitted by /u/StegersaurusMark
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