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      03-20-2009, 12:47 PM   #23
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Originally Posted by johnnymu View Post
Why do most company give higher bonuses than salary you think? cause there's a method of not paying a single dime on taxes on bonuses.

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Originally Posted by ruxp View Post
please explain..
ruxp, There is no one single answer to this question, because every company has their own plans. But here is how I get paid a healthy bonus from my company and pay much less taxes than you do on your wages:

1) Every year I get issued stock options with a strike price that is well below current market value. I have options I can exercise every year.

2) Every July, I sell stocks from a previous year's Stock Option purchase, and use the proceeds to fund that year's new Stock Option purchase. The Stock Option allows me to purchase my company stocks at the strike price. This is always well below the current market price of the stock (even this year), so I buy stocks worth much more than I pay for them.

3) I hold these stocks long enough that I only have to pay long-term capitol gains (currently 15%) on the profit I make from selling them. But since this is capitol gains income and not regular salary, I get to offset these gains with any capitol losses I have booked the same year. Since some of my stocks are always sold for a book loss every year, I never pay the full 15%. This year, I don't expect to pay any capitol gains taxes, because my booked losses (not the same as real losses) will most likely exceed my capitol gains.

4) Also, I don't pay ANY tax on the Stock Options until I actually sell the stocks (I don't sell them all every year). So when I donate to a non-profit, I donate my company stocks directly to them instead of donating cash. Since I donated it, I never pay any taxes on those stocks. When the non-profit sells them, they don't pay any taxes either.

5) When I die and leave these stocks in my will, I still will have never paid taxes on them. Whoever gets these stocks will get a stepped up tax basis, so they won't ever pay taxes on the amount they increased in value when I owned them. If they sell them immediately, NOBODY will ever pay ANY taxes on this money. I believe the same applies when you give a gift of up to $10,000 per person/per year in stocks to a relative, but I've never done that personally.

So yes, there are ways to never pay taxes on bonus money that would have to be paid on regular salaries. At worst, I would only pay 15% capitol gains taxes on my bonus. So when you hear people whine and complain about those evil tax brackets that are higher than 28%, remember that for many folks, this tax rate doesn't apply to all of their earnings. Many people only pay from 0-15% on portions of their earnings instead of more than 28% that you hear so much complaining about.

In fact, some Hedge Fund managers are reported to have managed to structure their ENTIRE compensation this way, paying 15% or less in taxes on all of their pay.
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      03-20-2009, 01:21 PM   #24
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Quote:
Originally Posted by Nixon View Post
In fact, some Hedge Fund managers are reported to have managed to structure their ENTIRE compensation this way, paying 15% or less in taxes on all of their pay.
All Hedge fund managers do is accept their incentive pay as investment inside their funds. For them it is legitimate capital gain as they can loose previous income if they have a bad year.
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      03-20-2009, 01:43 PM   #25
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Quote:
Originally Posted by Nixon View Post
ruxp, There is no one single answer to this question, because every company has their own plans. But here is how I get paid a healthy bonus from my company and pay much less taxes than you do on your wages:

1) Every year I get issued stock options with a strike price that is well below current market value. I have options I can exercise every year.

2) Every July, I sell stocks from a previous year's Stock Option purchase, and use the proceeds to fund that year's new Stock Option purchase. The Stock Option allows me to purchase my company stocks at the strike price. This is always well below the current market price of the stock (even this year), so I buy stocks worth much more than I pay for them.

3) I hold these stocks long enough that I only have to pay long-term capitol gains (currently 15%) on the profit I make from selling them. But since this is capitol gains income and not regular salary, I get to offset these gains with any capitol losses I have booked the same year. Since some of my stocks are always sold for a book loss every year, I never pay the full 15%. This year, I don't expect to pay any capitol gains taxes, because my booked losses (not the same as real losses) will most likely exceed my capitol gains.

4) Also, I don't pay ANY tax on the Stock Options until I actually sell the stocks (I don't sell them all every year). So when I donate to a non-profit, I donate my company stocks directly to them instead of donating cash. Since I donated it, I never pay any taxes on those stocks. When the non-profit sells them, they don't pay any taxes either.

5) When I die and leave these stocks in my will, I still will have never paid taxes on them. Whoever gets these stocks will get a stepped up tax basis, so they won't ever pay taxes on the amount they increased in value when I owned them. If they sell them immediately, NOBODY will ever pay ANY taxes on this money. I believe the same applies when you give a gift of up to $10,000 per person/per year in stocks to a relative, but I've never done that personally.

So yes, there are ways to never pay taxes on bonus money that would have to be paid on regular salaries. At worst, I would only pay 15% capitol gains taxes on my bonus. So when you hear people whine and complain about those evil tax brackets that are higher than 28%, remember that for many folks, this tax rate doesn't apply to all of their earnings. Many people only pay from 0-15% on portions of their earnings instead of more than 28% that you hear so much complaining about.

In fact, some Hedge Fund managers are reported to have managed to structure their ENTIRE compensation this way, paying 15% or less in taxes on all of their pay.
Enjoy it now. Obama said he will close all these type of loopholes along with increasing the capital gains tax to 20% and capping charity contributions.

Just look at Warren Buffet. His adjusted tax rate is around 16%. You would think a super rich guy like that would have a high tax rate. Well Warren make virtually nothing as far as taxable income. I think he has a $1 salary from Berkshire. His big tax burden is all his capital gains which is taxed at 15%, for now.
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      03-20-2009, 01:48 PM   #26
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Speaking of bonuses:

Quote:
According to The Independent, BMW will cut its board members’ compensation by 40 percent this year. BMW board members typically receive about 70 percent of their compensation through performance-oriented bonuses.

Additionally, senior executives will see a pay decrease of 30 percent compared to last year, while BMW’s other workers will likely see a 10 percent drop off in pay. Even company head Norbert Reithofer will see a drop in pay – by a whopping €1.65 million – but the BMW chief executive will still take home €2.3 in 2009.
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      03-20-2009, 01:55 PM   #27
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Enjoy it now. Obama said he will close all these type of loopholes along with increasing the capital gains tax to 20% and capping charity contributions.

Just look at Warren Buffet. His adjusted tax rate is around 16%. You would think a super rich guy like that would have a high tax rate. Well Warren make virtually nothing as far as taxable income. I think he has a $1 salary from Berkshire. His big tax burden is all his capital gains which is taxed at 15%, for now.

I'm absolutely fine with that. I did well in all the years before 2003 when Bush lowered capitol gains, and I'll continue to do well if Obama returns it back to 20%.

Even though I earn nowhere near the amount the top 2% of tax payers make each year, I've collected more than enough Economic Stimulus money over the last 6 years that was handed out in Bush's 2003 Economic Stimulus package. I don't need to take more Stimulus funds in the form of tax breaks from the government to supplement my income.

It won't change my charitable contributions at all, because I don't decide to give based upon how much the government will pay me back for my charitable contribution.

Warren Buffet will manage to keep a roof over his head, and food on the table too. He'll be fine. He's a big boy.

Last edited by Nixon; 03-20-2009 at 02:18 PM.
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      03-20-2009, 06:26 PM   #28
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Did anyone watch Obama on the tonight show last night? I thought it was interesting how he didn't completely answer the question when Jay Leno asked him (and I paraphrase): if Congress doesn't like a group of people and passes laws restricting them, is it an indicator of what's to come? I mean it's a little scary.

Basically Obama just said something along the lines of :we're trying to close the doors before the horse is out of the barn. We need to get this country back on track and it's going to take a lot of steps...

I just feel like he didn't really answer the question. I mean it is pretty damn scary how they could just pass a law and basically "segregate" or "discriminate" against a group of people.
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      03-20-2009, 07:22 PM   #29
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Quote:
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Warren Buffet will manage to keep a roof over his head, and food on the table too. He'll be fine. He's a big boy.
Didnt Warren Buffett vote for President Obama?
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      03-20-2009, 07:25 PM   #30
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Didnt Warren Buffett vote for President Obama?
Yep. Campaigned for him too.
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      03-20-2009, 07:30 PM   #31
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I thought so. Ironically, Rupert Murdoch through his weight behind Obama as well.
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      03-21-2009, 10:06 AM   #32
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New numbers came out saying the actual bonus total is 218 million. 73 staff got at least 1 million dollars each while 5 members got more than 4 million dollar each. Even with 90% tax that's a lot to swallow.
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Last edited by johnnymu; 03-21-2009 at 11:01 AM.
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      03-23-2009, 02:20 PM   #33
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The thing is, those bonuses, as described, were contractual obligations. "Don't worry about us wasting TRILLIONS of your dollars, look at these guys paying out MILLIONS of contractually obligated bonuses! The horror!!!"

Somebody (and by somebody, I mean, "Chris Dodd" although he had to be busted into admitting it by being caught telling two contradictory stories in two different TV interviews and then confronted) puts language in the trillion-dollar "stimulus" bill that authorizes paying out these greedy nimrods their bonuses, at the behest of Geithner, maybe (it's not clear on who directed him to do that, if anyone).

Then, nobody reads the damn bill, which authorizes payment of these bonuses that everyone is so pissed off about, but dumbass congresscritters approve it anyway.

And now, poor AIG CEO Liddy -- who's basically the executor of this disaster who's been APPOINTED BY THE GOVERNMENT and is working for $1/year (the original execs are long LONG gone) -- gets hauled up to Capitol Hill and HE gets bitched out for paying these bonuses, because THESE IDIOTS DIDN'T READ THEIR OWN GODDAMN BILL?

WHAT THE F?
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      03-23-2009, 11:32 PM   #34
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Quote:
Originally Posted by ChrisV View Post
The thing is, those bonuses, as described, were contractual obligations. "Don't worry about us wasting TRILLIONS of your dollars, look at these guys paying out MILLIONS of contractually obligated bonuses! The horror!!!"

Somebody (and by somebody, I mean, "Chris Dodd" although he had to be busted into admitting it by being caught telling two contradictory stories in two different TV interviews and then confronted) puts language in the trillion-dollar "stimulus" bill that authorizes paying out these greedy nimrods their bonuses, at the behest of Geithner, maybe (it's not clear on who directed him to do that, if anyone).

Then, nobody reads the damn bill, which authorizes payment of these bonuses that everyone is so pissed off about, but dumbass congresscritters approve it anyway.

And now, poor AIG CEO Liddy -- who's basically the executor of this disaster who's been APPOINTED BY THE GOVERNMENT and is working for $1/year (the original execs are long LONG gone) -- gets hauled up to Capitol Hill and HE gets bitched out for paying these bonuses, because THESE IDIOTS DIDN'T READ THEIR OWN GODDAMN BILL?

WHAT THE F?
+1...it has been said that "you get the government you deserve"...that is why if truly fear for our country...
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      03-25-2009, 01:09 PM   #35
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Self-government is an adult form of government, unlike dictatorship, and implicity relies on people assuming adult responsibilities to go along with their rights. The premier adult responsibility is one of self-support, and if the vast majority of people are not self-supporting, self-government can't long survive.

The proliferation of welfare policies can only lead to a greater impoverishment of society as a whole. Obama's administration has this idea that the way to deal with a real problem -- the steady decline in the purchasing power of the less educated classes in the US over the past 30 years -- is to use the tax code to redistribute income from those who have done better. I would favor trying to create a more favorable job climate for those without college degrees and the like by encouraging investment that leads to better paying jobs, rather than by punishing such investment as Obama seeks to do.
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