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The only way that was a true valuation of the shares at the time would be if he were willing to sell those shares to someone else at that price ($0.001) at the

The only way that was a true valuation of the shares at the time would be if he were willing to sell those shares to someone else at that price ($0.001) at the end of 1999. If not, that's not true value, that's just accounting fraud. For a valuation, there has to be a market and a market clearing price. If there is no market (no buyers and sellers), valuation is meaningless.

s1artibartfast 5y ago
That's not how tax law works. When you found a company you buy founder's stock, with an initial valuation filed with the IRS and this is the value until the next qualified valuation event, where it may change. Share prices of $0.01 to $0.00001 are common. I guarantee that $0.001 was the founders share price filed with the IRS at company formation. https://gust.com/launch/blog/how-to-value-startup-stock https://gust.com/launch/blog/how-to-value-startup-stock
- machinebun 5y ago
  Sure, $0.001 is the value on paper (and under current law). The point is, it's exploitable (let's say I'm an Apple engineer, I start a new company and get a wink wink from some friends in high places who want to invest in my company doing X. I put in my founders stock into IRA in return for first dibs on placement for the investor - 1 year later company has valuation, my stock has risen many %%. Sure, I'm technically doing everything legally, but practically it's somewhat equivalent to insider trading + avoids taxes). I would personally ban non-public investments in Roth IRAs. That way a debate about market value doesn't have to happen.
  - NonEUCitizen 5y ago
    Many times, $0.001 turns out to be too high a value for startup shares -- a lot of startup shares end up being worth zero.
  - s1artibartfast 5y ago
    seems like the far better solution is banning IRA investments in your own company. This is the current law. If you make a smart or lucky in somebody else's company, bitcoin, or whatever, it isn't an exploit, it is the point.

s1artibartfast 5y ago

That's not how tax law works. When you found a company you buy founder's stock, with an initial valuation filed with the IRS and this is the value until the next qualified valuation event, where it may change. Share prices of $0.01 to $0.00001 are common. I guarantee that $0.001 was the founders share price filed with the IRS at company formation. https://gust.com/launch/blog/how-to-value-startup-stock https://gust.com/launch/blog/how-to-value-startup-stock

machinebun 5y ago
Sure, $0.001 is the value on paper (and under current law). The point is, it's exploitable (let's say I'm an Apple engineer, I start a new company and get a wink wink from some friends in high places who want to invest in my company doing X. I put in my founders stock into IRA in return for first dibs on placement for the investor - 1 year later company has valuation, my stock has risen many %%. Sure, I'm technically doing everything legally, but practically it's somewhat equivalent to insider trading + avoids taxes). I would personally ban non-public investments in Roth IRAs. That way a debate about market value doesn't have to happen.
- NonEUCitizen 5y ago
  Many times, $0.001 turns out to be too high a value for startup shares -- a lot of startup shares end up being worth zero.
- s1artibartfast 5y ago
  seems like the far better solution is banning IRA investments in your own company. This is the current law. If you make a smart or lucky in somebody else's company, bitcoin, or whatever, it isn't an exploit, it is the point.