4 ms·

Selling yourself undervalued assets into your IRA is not legal. Thiel sold his roth IRA paypal stock for much less than it was valued by his funders.

missedthecue 5y ago
At the time that Thiel purchased the shares, PayPal hadn't been funded. The company was worth $0 on paper.
- acdha 5y ago
  > The company was worth $0 on paper. This is only true if you assume that everything involved (his time, knowledge, planning, etc.) had no value. Even if it would be unreasonable to predict how valuable it’d become, $0 is hard to defend.
  - xyzzyz 5y ago
    Ok, I have put a lot of my knowledge and planning into my LLC. Wanna buy it for a bargain price of $1000? Sure, it has no assets, but think of all the knowledge and planning I put into it.
    - acdha 5y ago
      Have you already raised funds, as he had? Are you aware of major additional investments pending, as he was? Do you have business deals in progress, as they did? There’s a reason why their own SEC filings described those shares as being issued below fair value. A simple fix for this would be to prevent private holdings from being placed into a Roth since independent valuations are hard to establish without market data but it’d be even better to simply cap the tax-free gains as suggested - if you accumulate millions in returns, paying taxes on the portion over n million is fine because you’ve still been phenomenally lucky and will retire wealthy.
      - xyzzyz 5y ago
        Sorry, has Thiel already raised funds before adding stock to IRA, and nevertheless didn’t use the 409a value? Where did you get this information from? I see people claim this, but I have not seen any source for it.
        colinmhayes 5y ago
        The proPublica article says that paypal raised half a million dollars less than a month after he sold himself the shares. It raised millions more that year. Peter absolutely had been given a valuation by the venture capital firms when he sold himself the shares, deals like that don't suddenly materialize in less than a month. We can get into semantics about if paypal was actually worth what the firms were about to pay, but I think it's pretty clear that Peter committed fraud by selling himself shares for far less than he knew them to be worth. This isn't a "I feel like these are worth a lot" scenario. This is a "we'll give you half a million dollars in a couple weeks" scenario and then Peter undercut that valuation.
- kolbe 5y ago
  I guarantee you he wouldn’t have transferred it to you for $1 despite the fact that you claim that’s well in excess of its value
  - missedthecue 5y ago
    Thiel personally considered Paypal to be very valuable, and he turned out to be right. But his personal opinion about how much the firm was (going to be) worth is not the same thing as the actual value of the firm. Tim Cook might think that AAPL is worth $1000 a share, but it's not against the law for him to fill his IRA with Apple shares.
    - acdha 5y ago
      It would, however, be against the law for Cook to claim $20,000 worth of shares were $2,000 so he could stay under the limit. The same is true for Thiel: a private company doesn’t have such an easy way to document market value but he had insider knowledge suggesting that $0.0001/share was low, as their own SEC filings acknowledged. I would prefer that the fix be to set a tax-free cap (e.g. pay capital gains on returns over $10M) but I suspect that kind of example will get the most attention because it’s pretty clear that he low-balled it and even if that’s perfectly legal it won’t seem fair to the vast majority of the population who never have access to pre-IPO shares, much less the ability to claim their own valuation.
xyzzyz 5y ago
Where did you get this from? All I have seen is that he put it into IRA when it was worth very little, as all early stage startups are. Do you mean he used price below 409A valuation or something like that?

missedthecue 5y ago

At the time that Thiel purchased the shares, PayPal hadn't been funded. The company was worth $0 on paper.

acdha 5y ago
> The company was worth $0 on paper. This is only true if you assume that everything involved (his time, knowledge, planning, etc.) had no value. Even if it would be unreasonable to predict how valuable it’d become, $0 is hard to defend.
- xyzzyz 5y ago
  Ok, I have put a lot of my knowledge and planning into my LLC. Wanna buy it for a bargain price of $1000? Sure, it has no assets, but think of all the knowledge and planning I put into it.
  - acdha 5y ago
    Have you already raised funds, as he had? Are you aware of major additional investments pending, as he was? Do you have business deals in progress, as they did? There’s a reason why their own SEC filings described those shares as being issued below fair value. A simple fix for this would be to prevent private holdings from being placed into a Roth since independent valuations are hard to establish without market data but it’d be even better to simply cap the tax-free gains as suggested - if you accumulate millions in returns, paying taxes on the portion over n million is fine because you’ve still been phenomenally lucky and will retire wealthy.
    - xyzzyz 5y ago
      Sorry, has Thiel already raised funds before adding stock to IRA, and nevertheless didn’t use the 409a value? Where did you get this information from? I see people claim this, but I have not seen any source for it.
      - colinmhayes 5y ago
        The proPublica article says that paypal raised half a million dollars less than a month after he sold himself the shares. It raised millions more that year. Peter absolutely had been given a valuation by the venture capital firms when he sold himself the shares, deals like that don't suddenly materialize in less than a month. We can get into semantics about if paypal was actually worth what the firms were about to pay, but I think it's pretty clear that Peter committed fraud by selling himself shares for far less than he knew them to be worth. This isn't a "I feel like these are worth a lot" scenario. This is a "we'll give you half a million dollars in a couple weeks" scenario and then Peter undercut that valuation.
kolbe 5y ago
I guarantee you he wouldn’t have transferred it to you for $1 despite the fact that you claim that’s well in excess of its value
- missedthecue 5y ago
  Thiel personally considered Paypal to be very valuable, and he turned out to be right. But his personal opinion about how much the firm was (going to be) worth is not the same thing as the actual value of the firm. Tim Cook might think that AAPL is worth $1000 a share, but it's not against the law for him to fill his IRA with Apple shares.
  - acdha 5y ago
    It would, however, be against the law for Cook to claim $20,000 worth of shares were $2,000 so he could stay under the limit. The same is true for Thiel: a private company doesn’t have such an easy way to document market value but he had insider knowledge suggesting that $0.0001/share was low, as their own SEC filings acknowledged. I would prefer that the fix be to set a tax-free cap (e.g. pay capital gains on returns over $10M) but I suspect that kind of example will get the most attention because it’s pretty clear that he low-balled it and even if that’s perfectly legal it won’t seem fair to the vast majority of the population who never have access to pre-IPO shares, much less the ability to claim their own valuation.

xyzzyz 5y ago

Where did you get this from? All I have seen is that he put it into IRA when it was worth very little, as all early stage startups are. Do you mean he used price below 409A valuation or something like that?