SkyWest Employee Stock Purchase Program and 401K

[SLUF4]

Does anyone know the tax rules on selling stock quickly. I thought for some reason the taxes were really high if I sell right after the stock purchase. I thought there was a time like 60 days or something that would avoid that.

 

[JoeMerchant]

Yes, I've heard of it. But its never been an issue for me. And no, I'm no longer a rep. I've never heard of this being an issue for anyone at XJT and I'm sure there are some that make over 100k a year. Are you saying that SKYWRJGUY and others on this thread have made 100k a year and thus have this as an issue?

There are quite a few at ASA and Skywest that hit the 100K threshold every year...Many ASA pilots ran into this problem.....

 

[JoeMerchant]

Does anyone know the tax rules on selling stock quickly. I thought for some reason the taxes were really high if I sell right after the stock purchase. I thought there was a time like 60 days or something that would avoid that.

You have to hold it one year to qualify for the lower capital gains rate....otherwise it is taxed at the marginal tax rate.

 

[sweptback]

There are quite a few at ASA and Skywest that hit the 100K threshold every year...Many ASA pilots ran into this problem.....

With the new contract the discrimination test is performed just against ASA pilots, which should prevent the HCE trigger from happening. I assume ExpressJet is the same way.

Previously, we were compared with all ASA employees, most of which didn't contribute to the 401k. I think company-wide ASA is at 30% participation, which is why we ran into trouble with it before.

 

[IHateDaley]

Does anyone know the tax rules on selling stock quickly. I thought for some reason the taxes were really high if I sell right after the stock purchase. I thought there was a time like 60 days or something that would avoid that.

You will not get favorable tax treatment if you sell the shares less than 2 years after the beginning of the purchase period AND less then 1 year after the purchase date. So with the SKYW plan, we must wait 2 years after the beginning of each 6-month period for the sale to be treated as a qualifying disposition.

If you don't wait the required time, your sale will be treated as a disqualifying disposition. That means that the proceeds from the sale will be treated as ordinary income and taxed at your normal tax rate, not the (usually) lower capital gains rate.

There are many caveats and gotchas in Section 423 that deals with ESPPs, and also additional rules dealing with short and long-term capital gains, so consult your tax advisor and a shrink before you file your return.

 

[Chairman]

Regardless how many pages we argue over the math 5% is a hell of a lot less taken at a discount 1 time v.s. 15% taken at the lower of two prices. Either way you work it major loss in total compensation!

 

[JoeMerchant]

With the new contract the discrimination test is performed just against ASA pilots, which should prevent the HCE trigger from happening. I assume ExpressJet is the same way.

Previously, we were compared with all ASA employees, most of which didn't contribute to the 401k. I think company-wide ASA is at 30% participation, which is why we ran into trouble with it before.

That's all true...but for years it was an issue. Many pilots had their contributions returned because they "made too much"....another case of social engineering that hurts people...

It should have never been an issue in the first place....Why penalize people who try to save because others don't....?

Now we are seeing changes in the ESPP because of govt. accounting rules....

 

[SLUF4]

man..2 years-well maybe that'll give the bull market time to come back around

 

[sweptback]

That's all true...but for years it was an issue. Many pilots had their contributions returned because they "made too much"....another case of social engineering that hurts people...

It should have never been an issue in the first place....Why penalize people who try to save because others don't....?

Now we are seeing changes in the ESPP because of govt. accounting rules....

It wasn't because they made too much, it was because they unfairly benefited from the tax deduction. A person making over $100k has more money to invest than somebody making $50k and coincidentally gets a tax break on top of that.

Anyway, it happened under the Reagan administration, although the 401k was done under Carter:

"Also in 1984, Congress passed legislation requiring nondiscrimination testing, to make sure that the plans did not discriminate in favor of highly paid employees more than a certain allowable amount." -Wikipedia

 

[JoeMerchant]

It wasn't because they made too much, it was because they unfairly benefited from the tax deduction. A person making over $100k has more money to invest than somebody making $50k and coincidentally gets a tax break on top of that.

Anyway, it happened under the Reagan administration, although the 401k was done under Carter:

"Also in 1984, Congress passed legislation requiring nondiscrimination testing, to make sure that the plans did not discriminate in favor of highly paid employees more than a certain allowable amount." -Wikipedia

Are you defending it? It was a Democratic Congress in 1984...You shouldn't be penalized for making "too much"....We reward bad behavior in this country and penalize good behavior....