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Why do vested company stock show as income in a W2 box? This in turn inflates the amount of income without actually having sold any shares.
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Well, that's what the tax law dictates here. You got a valuable and very liquid asset - stocks - for putting in long hours and slaving away for your company. The fact that the very valuable and very liquid asset isn't "cash" - also very valuable and very liquid - doesn't really change anything. The second you you got that stock you could instantly turn that stock into cash, if you choose to. If you don't choose to do sell the stock then it's "as if" your employer gave you a large bonus and you immediately invested that cash into company stock.
Bottom line: the award of stock from your employer that you can sell the instant you receive it is considered as compensation.
Tom Young
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