AMT for one. If you get a sudden windfall in the form of stock options, the IRS requires you pay tax UP FRONT for the full amount. Even if those stocks are not

AMT for one. If you get a sudden windfall in the form of stock options, the IRS requires you pay tax UP FRONT for the full amount. Even if those stocks are not liquid at all. So say you worked at google in the early days and spent 10k of your savings to exercise your stock options. Those stocks are worth 100 million dollars, but google is a private company and you are still uncertain of it's future. The IRS will demand you pay tax on 100 million dollars right that minute. Obviously, this would be impossible since you cannot sell your stock, and it's value is only based on speculative appraisals. Say you somehow got a loan to pay that tax up front. Say the tax was 20 million dollars. Then google goes belly up and your stock becomes worthless. Too bad so sad! You are on the hook for paying back that 20 million dollars.