jmog;435349 wrote:MB please don't use facts about how stock options really work here. The liberals really would rather just rant and rave using hyperbole and rhetoric about "golden parachutes" and "lucrative stock options", etc.

As soon as you describe how its really done, their rhetoric becomes useless.

Yep, no liberals understand stock options or even work anywhere in finance, anywhere in the world, or even work at all, for that matter.

You're too smart to fall into idiotic generalizations.

We're not all like Gibby.

Con_Alma;435265 wrote:????

I need your help understanding this a little bit.

The cashless options I received I paid tax on the gains when I liquidated them. Any gain above the issued prices was claimed.

Oh good grief. First Manhatten Buckeye...and now you too? Both of you make your living in the financial world...and you 2 are trying to tell me that there is no advantage in remuneration that falls under the capital gains column versus the personal income column? Please knock it off.

If anyone else wants to read an article that explains this horrendous regressive tax..then open this link.

To MB and Con...go head and argue all you want to...that compensation through options is oh so cool for investing billionaires, but don't try to pass on the crap that this tactic doesn't exist.

http://seekingalpha.com/article/37446-congress-to-close-stock-option-expense-tax-loophole

And then there is this.......

Myths and Facts about Private Equity Fund Managers
— and the Tax Loophole They Enjoy
Congressman Sander Levin (D-Mich.) has introduced a bill (H.R. 2834) in the House of
Representatives to eliminate a tax loophole that allows private equity fund managers to pay
taxes on their compensation at a much lower rate than other working people have to pay.
Most of us who earn an income from work are subject to federal income taxes at progressive
rates, starting at 10 percent and going up to 35 percent for the very wealthiest. Private equity
fund managers are at the top of this wealthy group, but nevertheless pay only 15 percent —
the special low capital gains tax rate — on almost all of their compensation. This form of
wages, called “carried interest,” can run into the hundreds of millions or even in excess of a
billion dollars a year for individual fund managers.

The link and the rest of the article is here....

http://www.ctj.org/pdf/privateequity071907.pdf

"Oh good grief. First Manhatten Buckeye...and now you too? Both of you make your living in the financial world...and you 2 are trying to tell me that there is no advantage in remuneration that falls under the capital gains column versus the personal income column? Please knock it off."

You mean that there is a difference in tax rates? Anyone knows that. You know why? One item contains a lot more risk and restrictions.

Again, if I offered to pay you $100,000, or give you $100,000 of accounting value of options, where the underlying stock price is $10/share, but the strike price is $11/share, which would you choose?

I'm asking you again, do you understand how options work?

-edit, did you even read the seekingalpha article you posted? The "loophole" is the accounting treatment for the corporation - ergo the tax liability for the company.

Footwedge;437392 wrote:Oh good grief. First Manhatten Buckeye...and now you too? Both of you make your living in the financial world...and you 2 are trying to tell me that there is no advantage in remuneration that falls under the capital gains column versus the personal income column? Please knock it off.

If anyone else wants to read an article that explains this horrendous regressive tax..then open this link.

To MB and Con...go head and argue all you want to...that compensation through options is oh so cool for investing billionaires, but don't try to pass on the crap that this tactic doesn't exist.

http://seekingalpha.com/article/37446-congress-to-close-stock-option-expense-tax-loophole

Wow. Thanks for emphasizing my point Footwedge.

Stock options and similar tools are 100% engineered and designed to reduce federal tax liabilities for the top execs. 100%. It matters nothing at all that these are tied into performance. Nothing. Straight commissioned sales agents get paid on their individual performances. If they could somehow circumvent their "performance driven" compensation package to the 15% tax rate...they would do it in a heartbeat. B ut the "performance driven" incentive package of the 200K/annum straight commissioned sales rep, is not in the class of those that run corporate America, which can take advantage of lobby driven tax breaks...of well over 50%. Nothing more than a huge regressive tax scheme.

Both Con and MB are class warfare proponents. And pro plutocracy.

Another element of Adam Smith's vision of a true competive spirited system being shit on.

Does supporting an increase in our current highest marginal tax rate lend to me being a proponent of class warfare?

I'm much more indifferent about the potential impacts on other people's financial status than one who is a true proponent of class warfare.

Manhattan Buckeye;437511 wrote:"Oh good grief. First Manhatten Buckeye...and now you too? Both of you make your living in the financial world...and you 2 are trying to tell me that there is no advantage in remuneration that falls under the capital gains column versus the personal income column? Please knock it off."

You mean that there is a difference in tax rates? Anyone knows that. You know why? One item contains a lot more risk and restrictions.

Again, if I offered to pay you $100,000, or give you $100,000 of accounting value of options, where the underlying stock price is $10/share, but the strike price is $11/share, which would you choose?

I'm asking you again, do you understand how options work?

-edit, did you even read the seekingalpha article you posted? The "loophole" is the accounting treatment for the corporation - ergo the tax liability for the company.

I read the whole thing. But I didn't need to read it...because I know what the deal is. You want to respond to my comparative example on the 200K straight commissioned sales rep and the CEO? You are digging your hole deeper with each and every post. Trust me.

Con_Alma;437727 wrote:Does supporting an increase in our current highest marginal tax rate lend to me being a proponent of class warfare?

What does that have to do with the issue I've presented? Nothing. There are 2 sides to every war...including the class warfare "war". You and MB are pro 60% tax loopholes for te CEO's and such. That tells me that you are in fact a class warfarist. You espouse a regressive tax break of 60% for the CEO's. A tax loophole driven by lobby groups that represent the top .001% of the earning class.

Many capitalist countries denounce such class warfare ideology.

Footwedge;437733 wrote:What does that have to do with the issue I've presented? ....

I'm not sure it has anything to do with the "issue" you presented but then again it wasn't intended to. It was an example for you to consider why I may not be a class warfare proponent.

I would like you to find and quote one sentence in this thread that I have posted that shows I am in favor of a tax loophole or stock options of any variety.

You my friend can't see the forest for the trees.

Footwedge;437392 wrote:Oh good grief. First Manhatten Buckeye...and now you too? Both of you make your living in the financial world...and you 2 are trying to tell me that there is no advantage in remuneration that falls under the capital gains column versus the personal income column? Please knock it off.
...

I told you nothing but rather asked you to expand. The article you posted does expand on your point and also help confirmed my comments on the personal tax side.

Footwedge;437724 wrote:... It matters nothing at all that these are tied into performance. Nothing. Straight commissioned sales agents get paid on their individual performances. ....

When it matters is when the options expire worthless. Paying the top marginal rate on cash results in a net keep which is higher than options which have expired worthless.

Footwedge;437724 wrote:...
Both Con and MB are ... pro plutocracy.

...

There is absolutely no evidence to support such a claim that my ideology is comprised of control based on assets or wealth.

In fact, I would rather see less impact on how decisions are made based on where the wealth exists.

"Stock options and similar tools are 100% engineered and designed to reduce federal tax liabilities for the top execs."

Which is why my wife received them (who although I would love to have be a top exec...isn't), and more importantly - why they are a large part of private company comp?

Heck, if anything investors insist on options and restricted stock comp for their targets' employees, tax doesn't enter into the equation when the company is young and burning money.

Con_Alma;437750 wrote:When it matters is when the options expire worthless. Paying the top marginal rate on cash results in a net keep which is higher than options which have expired worthless.

. And what are the odds of options becoming worthless? How many times has that happened? Not even Lehman Bros nor Bear Stearns saw their shares become worthless. It doesn't happen...even if a company liquidates...and for the top end corp execs stock option groups, it never happens.

Of the Fortune 500 companies, google even one case where the stock prices dipped to zero.

Con_Alma;437754 wrote:There is absolutely no evidence to support such a claim that my ideology is comprised of control based on assets or wealth.

In fact, I would rather see less impact on how decisions are made based on where the wealth exists.

If that were true, then there is no way that you would endorse a CEO paying capital gains rates of 15% in our country.

Footwedge;437986 wrote:. And what are the odds of options becoming worthless? How many times has that happened? Not even Lehman Bros nor Bear Stearns saw their shares become worthless. It doesn't happen...even if a company liquidates...and for the top end corp execs stock option groups, it never happens.

Of the Fortune 500 companies, google even one case where the stock prices dipped to zero.

The price doesn't have to be zero to be worthless, just under the strike price, and it happened exactly in the circumstances you claim didn't, with both Bear and Lehman.

I've given you a hard time in the past, and don't know what issue you had with "product exposure" (I really hope it isn't tweaking a pharma product, if so....see a doctor), but your posts aren't even making sense at this point.

Manhattan Buckeye;437996 wrote:The price doesn't have to be zero to be worthless, just under the strike price, and it happened exactly in the circumstances you claim didn't, with both Bear and Lehman.

I've given you a hard time in the past, and don't know what issue you had with "product exposure" (I really hope it isn't tweaking a pharma product, if so....see a doctor), but your posts aren't even making sense at this point.

My posts make perfect sense...and you know it. I've given you a perfect example...comparing a straight commissioned rep and a CEO. You have not addressed the corollary...because you can't. My "exposure" happened during during the 90's, when I was self employed....which ruined a very good business that I had built from ground up. In the age of google, any specifics would blow my anonymous cover...which could be very bad for me....in my new line of work.

Well I hope it wasn't substance abuse related, at any rate your example still doesn't make much sense. What difference does it make what the employee's title is? Whether it is a Rep or the CEO of Pfizer, cash comp is ordinary income, to the extent there is equity compensation that may have favorable tax treatment, it is comp at risk. And often the comp is worthless. It doesn't matter if the stock price is $9 or $0, if the strike price is above the former, even if there is "value", it is worthless.

Footwedge;437987 wrote:If that were true, then there is no way that you would endorse a CEO paying capital gains rates of 15% in our country.

It is true.

Where have I endorsed anyone paying 15% capital gains rate?

Footwedge;437986 wrote:. And what are the odds of options becoming worthless? How many times has that happened? Not even Lehman Bros nor Bear Stearns saw their shares become worthless. It doesn't happen...even if a company liquidates...and for the top end corp execs stock option groups, it never happens.

Of the Fortune 500 companies, google even one case where the stock prices dipped to zero.

I don't know exactly what the odds are. I don't know how many times it has happened. That comment was a response to you stating it matters nothing at all and then for effect again stated "nothing".

This is not just a CEO issue. I was exposed to many high tech companies in the 90s who used stock options as a way to lure employees from competitors. One such example were options I was offered to work for a company headquarter out of Massachusetts.... specifically Norwood. I was forced to act on them within 60 months. The market price was not above the strike price after 5 years.

This was how sales and marketing talent were captured and provided incentive to leave larger, stable companies. It was an opportunity to catch on with a potentially rising player in the telecommunications industry. It was a risk but had potentially* large benefits.

Con_Alma;438211 wrote:I don't know exactly what the odds are. I don't know how many times it has happened. That comment was a response to you stating it matters nothing at all and then for effect again stated "nothing".

This is not just a CEO issue. I was exposed to many high tech companies in the 90s who used stock options as a way to lure employees from competitors. One such example were options I was offered to work for a company headquarter out of Massachusetts.... specifically Norwood. I was forced to act on them within 60 months. The market price was not above the strike price after 5 years.

This was how sales and marketing talent were captured and provided incentive to leave larger, stable companies. It was an opportunity to catch on with a potentially rising player in the telecommunications industry. It was a risk but had potential large benefits.

Not only are the odds good, I'd wager the majority of options issued in the last 5 years are underwater. The same thing happened in the '01-'02 crash. When companies see their share pricing falling by 50-75% or greater, it is only logical that options granted in that period have a higher strike price than FMV.

This is a more recent article, but again in '01-'02 this was a big deal:

http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/UnderwaterStockOptions.aspx

I even worked on a self-tender offer exchange for a company that saw its stock tank - and the Directors and executive officers weren't allowed to participate.

Footwedge;437396 wrote:And then there is this.......

Myths and Facts about Private Equity Fund Managers
— and the Tax Loophole They Enjoy
Congressman Sander Levin (D-Mich.) has introduced a bill (H.R. 2834) in the House of
Representatives to eliminate a tax loophole that allows private equity fund managers to pay
taxes on their compensation at a much lower rate than other working people have to pay.
Most of us who earn an income from work are subject to federal income taxes at progressive
rates, starting at 10 percent and going up to 35 percent for the very wealthiest. Private equity
fund managers are at the top of this wealthy group, but nevertheless pay only 15 percent —
the special low capital gains tax rate — on almost all of their compensation. This form of
wages, called “carried interest,” can run into the hundreds of millions or even in excess of a
billion dollars a year for individual fund managers.

The link and the rest of the article is here....

http://www.ctj.org/pdf/privateequity071907.pdf

I'm not getting involved in the whole stock options thing...but this particular thing footwedge is discussing is all I hear about. I hear folks say that hedge fund managers are receiving inequitable treatment because their getting taxed under capital gain rates when really it appears as if they're receiving compensation for services rendered which is to be taxed at ordinary income rates. It's like one small segment of society getting a lower tax rate for their ordinary income when people who earn similar sums of money have to pay higher rates. Traditionally in tax law, substance trumps form and though "carried interest" or whatever the characterization of fund manager's income may be taxable at capital gain rates in "form" it seems like in "substance" they're being compensated for services rendered.