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My experience is that employees who are underwater get demotivated and eventually just quit. That is why companies are switching to RSUs. However for AMT (Alt
by btilly 8y ago
My experience is that employees who are underwater get demotivated and eventually just quit. That is why companies are switching to RSUs.
However for AMT (Alternative Minimum Tax) purposes, the price as of your IPO is money you earned, even if you couldn't sell. Which during the dot com crash lead to a lot of people owing more in tax than they made, and with shares that couldn't be sold to cover it. I personally knew several who didn't have to pay taxes for several years afterwards because they were able to carry forward the losses from that disaster.
- angstrom 8y agoThe long term capital gains loss is funny. I think I ended up with something like 30 years worth of LTCG losses I'll be able to carry forward. It's like a reminder that just keeps on reminding year after year how badly you can get shafted.
- mavelikara 8y agoMany firms who offer RSUs offer double-trigger RSUs (i.e. the RSUs vest only if the vesting period is met AND a liquidity event happens) to prevent these tax consequences you outline. These function as golden handcuffs too.