409A isn't an arbitrary number the board makes up. Private co's pay external firms to do market research and sift through internal financial/key metrics to deri

409A isn't an arbitrary number the board makes up. Private co's pay external firms to do market research and sift through internal financial/key metrics to derive that number. Your scenario of an immediate $.30 tax liability because of an arbitrary discount also isn't correct. 409A is recalculated on some interval (quarterly generally) and those price changes determine your stock's new value and subsequent tax liability, but only when you exercise options/sell shares. The common stock discount you're referring to is when there are preferred shares granted to an investor, but common is still determined by an external firm. Edit: harryh beat me because I type too slowly.