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It looks like according to this source [1] placing stock options in a self-directed IRA violates tax code. This makes me wonder what kind of trickery was used t

• vmception 5y ago
  Wrong search string. IRAs simply cant have assets contributed to them, only USD cash. With that USD they can purchase anything. Additionally, stock options aren’t relevant here when it can also just buy shares directly, easy when you have executive authority over the company to sell shares. Thiel had under 10% ownership of PayPal quick enough that year to comply with regulations (he had 3.5% ownership in 2002 when it was sold) OR Thiel paid the penalty of $2,000 (100% penalty if transaction not undone) and didnt unwind the transaction, and still appreciated all the upside OR the IRS took too long to discover the issue to levy the $2,000 fine Doesn’t matter we don’t have the details, those are the possibilities and universe of consequences
  • nrmitchi 5y ago
    > Thiel had under 10% ownership of PayPal quick enough that year to comply with regulations (he had 3.5% ownership in 2002 when it was sold) If you're arguing that these stock units were purchased when the "company" was created in 1998, then you're talking about Confinity (not "PayPal"), which only had 3 founders. Thiel was clearly a >10% shareholder at the time. Or are you trying to argue that Thiel had a 0% stake, because his IRA had all of his stake? You're using a 3.5% number from 3 years later, after merging with x.com, and raising ~$170M. > OR Thiel paid the penalty of $2,000 (100% penalty if transaction not undone) and didnt unwind the transaction, and still appreciated all the upside This is the biggest cop-out excuse of "valid". By this logic I can sell myself (into my Roth) all of my assets every year for $1, pay a $1 penalty, and everything is a-okay.
    • vmception 5y ago
      Yes, you can use that logic, its up to you to make that valuable. Unless you have a market of VCs or massive liquidity lined up it is a big and bad bet. The other side of the logic is that the ownership percentage can be bound to the tax year instead of just the moment of the transaction. So you would be using an average % ownership which could have changed rapidly. And of course there is the simple reality that he paid a $2000 fine The financial engineering has always been available, obviously for 20+ years, many people just hadnt been inspired to do it until now. There are plenty of similar possibilities available that considers multiple state paths of value to generate massive returns.
  • garmaine 5y ago
    Buying even one founder share in your startup is self-dealing and a prohibited. The penalty is the whole account loses tax advantaged status, not a measly $2000. But tax details are private and between Thiel and the IRS.
    • vmception 5y ago
      There is alot of flexibility in avoiding the loss of tax advantage status, which is why I point out the other penalties
      • garmaine 5y ago
        Not according to the legal advice I received when I founded my company and attempted the Thiel trick.
        • vmception 5y ago
          Then you should have had your lawyer present case studies and real world examples of consequences and let that help you synthesize the outcome you wanted to follow
          • garmaine 5y ago
            Are you a tax lawyer?
• mikeryan 5y ago
  Thiel bought his founders shares in Paypal - 1.7M shares 1/10th of a cent per share with money in his Roth.