4 ms·

> Wouldn't the prudent thing to do be to sell at least enough stock to pay the tax? It's not liquid yet, that's the issue. That's what is nice about most RSU p

> Wouldn't the prudent thing to do be to sell at least enough stock to pay the tax? It's not liquid yet, that's the issue. That's what is nice about most RSU plans -- they immediately sell to cover, so you don't receive a ton of stock with an attached tax bill. But illiquid options are different; the capital gains tax is for the paper-wealth you just received. That same paper wealth can evaporate, but the tax bill remains.

tuna-piano 10y ago
So you have an asset that is considered worth a price, but you cannot buy it or sell it at that price? Seems to me an unfortunate tax policy.
- demonshalo 10y ago
  almost all tax policies are unfortunate.
  - lostlogin 10y ago
    .. Although it is handy to have had an education, healthcare, police service, fire service, roads, libraries etc. But other than that stuff, it's very unfortunate.
    - gvb 10y ago
      The OP said due to tax policy, not taxes. Due to perverse incentives (pandering to various classes of voters) and unintended consequences, tax policies have become byzantine horrors.
      - Bartweiss 10y ago
        Very broadly, it seems like tax policy fails to cope (pleasantly) with anything other than totally standard earnings. If you earn a steady wage, or simple capital gains, things go fine. Anyone dealing in options, variable hours, contract work, or anything else unconventional faces totally irrational outcomes unless they're exceedingly careful.
    - Bartweiss 10y ago
      That's about taxation, not tax policy. How much money you need to collect and how you collect it are two very different beasts. Virtually any unconventional earnings have the potential to screw you based on the intricacies of law, rather than the average tax rate employed.
- jonathankoren 10y ago
  It's the exercise and hold that gets you. If you do a same day sell, you have the money to cover the taxes immediately, since you sold. If you exercise and hold, you pay the money to exercise, and now owe taxes on the asset at fair market value of the assets when exercised, which you might not have because your bank account is actually decreasing. In the future, if the asset loses value, even if you sold all of it, you may still be left with a tax bill you can literally never repay.
  - infinite8s 10y ago
    Except you can't sell if the company is still private.
    - jonathankoren 10y ago
      That's not true. The market it very illiquid, but you can sell it. Sharespost is one place.

tuna-piano 10y ago

So you have an asset that is considered worth a price, but you cannot buy it or sell it at that price? Seems to me an unfortunate tax policy.

demonshalo 10y ago
almost all tax policies are unfortunate.
- lostlogin 10y ago
  .. Although it is handy to have had an education, healthcare, police service, fire service, roads, libraries etc. But other than that stuff, it's very unfortunate.
  - gvb 10y ago
    The OP said due to tax policy, not taxes. Due to perverse incentives (pandering to various classes of voters) and unintended consequences, tax policies have become byzantine horrors.
    - Bartweiss 10y ago
      Very broadly, it seems like tax policy fails to cope (pleasantly) with anything other than totally standard earnings. If you earn a steady wage, or simple capital gains, things go fine. Anyone dealing in options, variable hours, contract work, or anything else unconventional faces totally irrational outcomes unless they're exceedingly careful.
  - Bartweiss 10y ago
    That's about taxation, not tax policy. How much money you need to collect and how you collect it are two very different beasts. Virtually any unconventional earnings have the potential to screw you based on the intricacies of law, rather than the average tax rate employed.
jonathankoren 10y ago
It's the exercise and hold that gets you. If you do a same day sell, you have the money to cover the taxes immediately, since you sold. If you exercise and hold, you pay the money to exercise, and now owe taxes on the asset at fair market value of the assets when exercised, which you might not have because your bank account is actually decreasing. In the future, if the asset loses value, even if you sold all of it, you may still be left with a tax bill you can literally never repay.
- infinite8s 10y ago
  Except you can't sell if the company is still private.
  - jonathankoren 10y ago
    That's not true. The market it very illiquid, but you can sell it. Sharespost is one place.