[lurker17]

Is the article's bogeyman description of RSUs accurate at all? My understanding was that an RSU was equivalent an option priced at $0. The issue is the exercise date, not option-vs-RSU. Lots of public companies (Amazon, Google, etc give at RSUs). the issue, as jpdoctor mentions in this thread, is that you pay income tax on the value of stock (minus option price, if any) on the day you exercise, which is some time between vest date and sell date (option/stock-holder's choice).

RSUs are only expensive if they vest when the stock is expensive, exactly the same as with options.

In either case, the earlier they vest, the lower taxes are (due to capital gains tax rates)

The only way I can imagine the article making sense is if Facebook gave employees delayed vesting schedules beyond the usual 25%/yr, and so stock grants vested later (at higher market price) than they would otherwise.

Yes?

[sokoloff]

An RSU is not exactly equal to an option with a strike of $0, because you control the exercise date on an option. Not so on an RSU.

The taxable event with options is the date of exercise (or the 83b election), not the date of vesting. The option owner has control over the date of exercise, meaning they can delay exercise until after the vesting date.

An RSU, having a "strike price" of $0, "exercises" (and therefore is a taxable event) the instant it vests.

In both cases, the gain (the surplus of fair market value over exercise price) is ordinary income and taxed as such.

In both cases, the gains (or losses) after the initial taxable event are capital gains, and the rules are not as simple as for stocks, but basically, for employees with typical vesting, hold the shares for a year after exercise and these gains are long-term capital gains.