The Situation

Daniel is a senior software engineer at Microsoft, about six years in, living just outside Seattle with his wife and their toddler. His RSUs vest quarterly, and like a lot of engineers, he’d never sold a single share. His logic was the one everyone at work repeats: MSFT always comes back. So he held — through every vest, through every dip.

This year the dip stuck around. By late June his position was down roughly 24% on the year, and he was staring at a brokerage balance that looked a lot smaller than it did in January. He was doing plenty right: maxing his 401(k), living well below his means, saving aggressively. But he was anchored to last year’s higher price, waiting for the stock to “get back to even” before he did anything.

The Gap We Found

Here’s the part almost nobody warns you about: even in a down year, you owe full tax on every RSU the day it vests — at its market value that day, as ordinary W-2 income. Daniel was doubly exposed. His shares were falling and his employer was only withholding the standard 22% federal supplemental rate, while his actual marginal rate was 35%. On roughly $180K of RSU income, that gap quietly added up to about a $22,000 shortfall he’d owe at filing — plus a likely underpayment penalty. Paper losses, real tax bill. And no one had ever given him a framework for whether to sell at vest or hold.

What We Did

First, we reframed the decision. Because RSUs are taxed as ordinary income the moment they vest, holding them isn’t “keeping your Microsoft stock” — it’s receiving a cash bonus and choosing to buy MSFT with all of it. Once Daniel saw it that way, the sell-at-vest rule became obvious: sell at vest, and there’s almost no additional capital gains tax on that lot because the cost basis equals the vest price. We built him a simple, written rule for every future vest, so it’s a decision instead of a default.

Then we used the down year — the part he saw as bad news. His recent vested lots were underwater by about $70,000, so we harvested those losses: selling the depressed shares to lock in the loss for tax purposes, then immediately reinvesting the proceeds into a diversified, direct-indexed portfolio (steering clear of the wash-sale rule). Those banked losses offset $3,000 of ordinary income this year and carry forward indefinitely against future gains. A down year is the best window to do this — the exact opposite of trimming a winner, where every sale triggers a bill.

[CHART: before/after — single-stock concentration in MSFT, ~55% of liquid net worth before vs. ~25% after]

Finally, our AI agents parsed his payroll data, flagged the withholding shortfall before filing season, and calculated the estimated payment he needed to make now — so he’d sidestep the underpayment penalty instead of discovering the whole mess next April. His advisor walked him through each move and executed alongside him.

The Result

• ~$70,000 in tax losses harvested — banked to offset future gains, worth an estimated $16,000+ in future tax savings as he diversifies.
• ~$22,000 surprise tax bill caught early, plus the underpayment penalty avoided, by fixing the withholding gap before filing.
• Single-stock concentration cut from ~55% to ~25% of his liquid net worth — at effectively zero tax cost, because the shares were already at a loss.
• A clear sell-at-vest rule, so every future Microsoft vest is a deliberate choice, not a reflex.

[CHART: savings breakdown — where the first-year value came from: ~$22K surprise bill caught early, ~$16K future tax savings from harvested losses, plus the underpayment penalty avoided]

Why This Worked

None of Daniel’s existing help was wrong — his CPA files an accurate return, and his 401(k) is well-managed. But the CPA only sees the tax return after the year is over, and no one was looking at his vesting schedule, his withholding, and his concentration risk at the same time, in real time. That’s the whole point of an integrated, flat-fee fiduciary team: the down year stops being something you wait out and becomes something you use. If your equity is underwater and you’re just holding on, we’d love to walk you through your options.

Disclosure

This case study is a composite illustration based on real Alphanso client scenarios. Names and identifying details have been changed for privacy. Results are not guaranteed and will vary based on individual circumstances. All investing involves risk, including the possible loss of principal. Alphanso LLC is a registered investment adviser.