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> Your options have a strike price and private companies generally have a 409A valuation to determine their fair market value. Is this exactly accurate? My u
by jMyles 10y ago
> Your options have a strike price and private companies generally have a 409A valuation to determine their fair market value.
Is this exactly accurate? My understanding was that you owe gains tax on the difference between the 409A and (strike price + wages traded for options).
In other words, if you take a $1000 / month cut for one year in exchange for options, you get to add $12,000 to your cost basis for the purpose of calculating gains taxes.
Is this incorrect?
- tdiggity 10y agoSalary doesn't come into play when calculating gains taxes in the USA. In other words, the article has it correct.
- jMyles 10y agoWow. That's terrible. My gains tax for 2017 just went up. :-) So, what if you work 100% for equity? Even then, you don't get to declare any part of that?
- ska 10y agoDeclare as what? It's treated as income - you declare it, and you pay tax on it.
- jMyles 10y agoI meant declare as part of the cost basis. IE, if you are paid $5000 / week and you can optionally take $1000 of that as options, and you do so, why doesn't that $1000 become part of your cost basis?
- tdiggity 10y agoThat's just one of the problems with the whole stock options tax rules. You really have to pay to play (triple taxation!), and it makes the golden handcuffs so much more more worse. You see a lot of people doing short term sales because they can't afford to hold onto the stock for a year and take the AMT hit.
- ska 10y agoAh I see - that's not how it works currently, but I can see why one might wish it did.
- hedora 10y agoI have never heard of using salary to buy options instead of just having a fixed salary and fixed options package. This sounds like it might be a way to dodge the taxman (but you paid income tax on the $1000/month, so maybe not), or maybe your employer is trying an experiment with compensation packages.