4 ms·

It probably goes something like this: 1. Contribute cash to the IRA. Use IRA cash to buy stock options from someone who holds those options (e.g. yourself). En

It probably goes something like this: 1. Contribute cash to the IRA. Use IRA cash to buy stock options from someone who holds those options (e.g. yourself). Ensure that you have real paperwork to back up the price that you're paying because if you don't the IRS is going to eat you alive!!! 2. Wait until options have value. 3. Contribute additional cash to IRA. 4. Use cash to exercise options. There might be a slightly different flow to contribute the options, consult someone who knows what they're doing.

nrmitchi 5y ago
> Use IRA cash to buy stock options from someone who holds those options (e.g. yourself) Non-arms-length transactions, which includes you selling something to "yourself", are prohibited transactions with respect to IRAs (for pretty obvious reasons).
- sakopov 5y ago
  Wanted to add to this that there is very little that would stop IRS from taking IRA status off your account (unless you're Peter Thiel) and forcing you to sell all assets and pay capital gains if you committed a prohibited transaction. An example of such IRA violation that's fairly common is buying rental property with IRA and utilizing it for personal use.
- fennecfoxen 5y ago
  Oh, I'd believe it! In that case even fairly valued options would be a no-go; you'd have to buy them from someone else: probably tricky, doubly so for incentive options, and it sounds like buying publicly traded stock has a major advantage here.
toast0 5y ago
The article says he bought shares (at $0.001/share, I guess pretty early in the life of the company), not options. Now, maybe a startup that's willing to give you options might also be willing to sell you shares (after all, that's almost what an option is), and might be willing to sell you shares in your self directed Roth. Sadly, I didn't think to ask the startup I worked for about this. Would have been nice to not pay taxes to diversify.

nrmitchi 5y ago

> Use IRA cash to buy stock options from someone who holds those options (e.g. yourself) Non-arms-length transactions, which includes you selling something to "yourself", are prohibited transactions with respect to IRAs (for pretty obvious reasons).

sakopov 5y ago
Wanted to add to this that there is very little that would stop IRS from taking IRA status off your account (unless you're Peter Thiel) and forcing you to sell all assets and pay capital gains if you committed a prohibited transaction. An example of such IRA violation that's fairly common is buying rental property with IRA and utilizing it for personal use.
fennecfoxen 5y ago
Oh, I'd believe it! In that case even fairly valued options would be a no-go; you'd have to buy them from someone else: probably tricky, doubly so for incentive options, and it sounds like buying publicly traded stock has a major advantage here.

toast0 5y ago

The article says he bought shares (at $0.001/share, I guess pretty early in the life of the company), not options. Now, maybe a startup that's willing to give you options might also be willing to sell you shares (after all, that's almost what an option is), and might be willing to sell you shares in your self directed Roth. Sadly, I didn't think to ask the startup I worked for about this. Would have been nice to not pay taxes to diversify.