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No. But it isn't the individual's fault either. And it IS the IRS' fault for taxing an illiquid asset as if it were liquid. The only way that this sort of make
by beagle3 10y ago
No. But it isn't the individual's fault either. And it IS the IRS' fault for taxing an illiquid asset as if it were liquid.
The only way that this sort of makes sense is if you can pay your tax in illiquid assets - e.g. If you can pay your tax with the same shares.
The most logical tax code I know can be summarized as: no basis step-up except on an event when taxes are paid; taxes are paid whenever (and only if) something liquid gets exchanged. Even an exchange of illiquid with illiquid doesn't trigger step up or tax event.
As long as it is illiquid, taxing gains seems about as logical is randomly announcing "everyone should mark their assets now and pay taxes on unrealized gains" (which the IRS actually does if your financial asset is outside the US, but it is still crazy)
- overdrivetg 10y agoI can't upvote this enough. If the IRS is ascribing value X to stock options I can't liquidate, I should be able to pay my tax in the form of those options at whatever value I am being taxed on them. Of course, the devil's in the details as you probably don't want the government having voting shares in a bunch of private companies either... Maybe they just get a blanket clause to automatically exercise and sell as part of any IPO offering or something? This could have a double-down effect too as the government owns more illiquid stock and feels firsthand the pain of regulations (SarbOx anyone??) that result in fewer IPOs / longer time horizons to liquidity. Oh your revenue is going down because you've regulated companies out of the IPO market? Great, looks like time to get off your ass and actually FIX THE PROBLEM. C'mon guys.