4 ms·

Exercising options in a non-public company should not be taxed or valued in any way until the stock can be sold in a public market or to a purchasing entity. Of

Exercising options in a non-public company should not be taxed or valued in any way until the stock can be sold in a public market or to a purchasing entity. Of course what are the odds Congress would ever do that? Nil.

Mtinie 10y ago
Can't this be mitigated to a large degree by setting the value per share to an tiny fraction of a dollar? Sure, you'll have a tax to pay when the shares are granted, but it should be reasonable. I could get behind the scheme you commented with, but I'm unsure of generally why we have the system we currently do, so I would want to understand the rationale for the status quo.
- hx87 10y ago
  It probably has something to do with preventing creative ways of liquidating illiquid assets, such as borrowing against the assets and promptly defaulting.
- x0x0 10y ago
  In my understanding, there's huge tax penalties, both to employer and employee, for giving employees in the money options. Thus options have to be granted with a strike that is fmv or something approximating it. Excessively sandbagging the valuation would, I think, be consider doing the above. Further, you don't think businesses are averse to golden handcuffs, do you?
mavelikara 10y ago
From https://lofgren.house.gov/news/documentsingle.aspx?DocumentID=365511 https://lofgren.house.gov/news/documentsingle.aspx?DocumentI...: H.R. 4351 also includes an Incentive Stock Option (ISO) provision that corrects a severe inequity in the AMT tax system and finally resolves the ongoing AMT Incentive Stock Option crisis. This essential provision provides relief for hard working Americans who are treated unjustly by the tax burden caused when exercising their Incentive Stock Options. Under this important provision, employees will pay a fair and proportional tax on money actually made and will be relieved of the impossible burden of ongoing liability to pay taxes on income never received. This provision will help ensure that our companies continue attracting the best and brightest with competitive compensation packages.

Mtinie 10y ago

Can't this be mitigated to a large degree by setting the value per share to an tiny fraction of a dollar? Sure, you'll have a tax to pay when the shares are granted, but it should be reasonable. I could get behind the scheme you commented with, but I'm unsure of generally why we have the system we currently do, so I would want to understand the rationale for the status quo.

hx87 10y ago
It probably has something to do with preventing creative ways of liquidating illiquid assets, such as borrowing against the assets and promptly defaulting.
x0x0 10y ago
In my understanding, there's huge tax penalties, both to employer and employee, for giving employees in the money options. Thus options have to be granted with a strike that is fmv or something approximating it. Excessively sandbagging the valuation would, I think, be consider doing the above. Further, you don't think businesses are averse to golden handcuffs, do you?

mavelikara 10y ago

From https://lofgren.house.gov/news/documentsingle.aspx?DocumentID=365511 https://lofgren.house.gov/news/documentsingle.aspx?DocumentI...: H.R. 4351 also includes an Incentive Stock Option (ISO) provision that corrects a severe inequity in the AMT tax system and finally resolves the ongoing AMT Incentive Stock Option crisis. This essential provision provides relief for hard working Americans who are treated unjustly by the tax burden caused when exercising their Incentive Stock Options. Under this important provision, employees will pay a fair and proportional tax on money actually made and will be relieved of the impossible burden of ongoing liability to pay taxes on income never received. This provision will help ensure that our companies continue attracting the best and brightest with competitive compensation packages.