Tax and RSU who pays taxes on RSU given to spouse

#1

1 - If my spouse gives me Restricted Stocks Unit RSU that he must sell so he can give me a corrsponding $ amount, and we are both filing separately since separation, who is ultimately responsible to pay tax on capital gain when selling those RSU, me (receiving a $amount) or my spouse (selling RSUs)? (Please note that the company automatically withdraws money when RSUs are sold (to prepay taxes and I cannot be given any RSU pre-tax)

1 - If that is my spouse who is responsible to pay, then his tax bracket will apply. So my husband will do his own tax return afterward and maybe I may receive money back on any overpaid amount. Is this correct?

2 - If that is me who is responsible to pay taxes on RSUs, then my own tax bracket should now applies , correct? Then shall I pay only state tax or both federal and state taxes on those cashed out RSU? . Would my husband then get reimbursed by the IRS completely on what the company already withdrew, after he does his IRS tax declaration since he will declare that he gave me the totality of the money for those sold RSUs ?

Thank you

#2

  1. First, there is no guarantee that he “must” sell. Ideally, he will be able to transfer your portion of RSUs into an account in your name. You are each responsible for the taxes on your share of the RSUs, with the exception that you would not be responsible for employment taxes, since you’re not the employee.

  2. The two of you will want to “split tax report” the RSU sale proceeds and attach identical memos to your tax returns explaining that you are responsible for the taxes on your share of the RSUs and he is responsible for the taxes on his share. You’ll want to work with a CPA to properly handle the tax obligations.

#3

Thank you Christin

Can I take an example to make sure I get it right…

Let’s say my husband tax bracket is 50% and mine is 10%. Let’s assume we file tax separately (even though not divorced yet).

Let’s say there are 200 total VESTED RSUs and 100 of them are community property. The stock price is $10 per share.

In fact the company has already taken 50% to prepay taxes on vested RSU so remain ONLY 50 RSU post tax, as per his tax bracket.

a - The question is should the $ amount to be valued for exchange be based on 50 RSU according to my husband tax bracket so I have $500? This is the post tax nb and my husband is responsible to pay all taxes.

Or

b - should the $ amount to be valued for exchange be based on (assuming) 90 RSU according to my own tax bracket so I have $900 ? If yes, I pay all the taxes so will my husband get back the 50% in money already withdrawn by the company and how?

Or (maybe this is what you suggest about “split tax report”?)

c - should we consider doing an average of the 2 tax bracket of 50+10 /2 = 30 % so each of us is responsible to pay 15% tax and if yes, could we still pay 15% each even if we file separately?

Thank you

#4

I forgot to say that I would like to Value RSUs for Offset.

#5

None of your scenarios are correct, although “b” is probably the closest. The only way to guarantee a correct division is to work with a CPA or other tax expert, and I cannot advise anything else. RSU/stock division is a very complicated legal and financial issue. Please seek help.