Fun situation I found myself in a couple of years back: My options were expiring for a company I had worked for (3 year expiration after I left) and the seconda

Fun situation I found myself in a couple of years back: My options were expiring for a company I had worked for (3 year expiration after I left) and the secondary market was not great. I was able to make a sale well above my strike price but below the most recent 409(a) valuation. I arranged a deal where I exercised and sold the shares in the same day, with the buyer fronting the money to exercise as part of the transaction. In this case despite the fact that I sold the shares on the same day for less than the 409(a) valuation, that valuation is still used to determine taxes owed for exercising. And that spread is taxed as income, whereas the subsequent "loss" on the sale (since the cost basis for the stock was then the 409(a) valuation and I sold lower than that) is a capital loss, and so they do not cancel each other out. Luckily in my case my sale price was just a little below the 409(a) valuation so I didn't get hit too hard but still, it felt absurd.