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The "trick" is you put your near-worthless startup stock into the fund before any major valuations. So when your company shares are worth $0.01 or whatever, you
by spamizbad 5y ago
The "trick" is you put your near-worthless startup stock into the fund before any major valuations. So when your company shares are worth $0.01 or whatever, you put in a few thousand dollars worth of them each year before you valuation skyrockets.
Assuming the company goes public, the shares stay in the Roth. IANAL but I assume you lose Roth benefits and probably pay some penalties if the company gets sold for cash.
- nrmitchi 5y agoAs discussed previously, this "trick" is actually explicitly not permitted, because you could do something like say "My stock is only work $0.001 each ;)" while simultaneously selling to investors are orders-of-magnitude higher valuations. I mean, let's be real: the argument in defense of this is that Thiel bought his founders shares at "a fair value". There were 3 original founders, so the argument is that the company had a fair value of.... ~$5k? > you put in a few thousand dollars worth of them each year before you valuation skyrockets You can't transfer assets into an IRA like this either.
- spamizbad 5y agoSo how'd he do it?
- nrmitchi 5y agoWhat do you mean? Just because something is a prohibited transaction doesn't mean there is a magical fairly that ensures you don't. I'm sure you are aware that the audit-rate for wealthy individuals is (and was) significantly lower than other income brackets. There is no magical automated system that is going to catch and flag a not-arms-length transaction, and I'm sure he (well, his legal team) is sitting around saying "well it's a shame this wasn't caught at the time, you know, statute of limitations and such".