3 ms·

Can someone please ELI5 the parent comment?

bombcar 4y ago
Stock options (sometimes?) have an exercise date. If you don't exercise by that date, you give up on the options. But some of them would incur a tax liability at option exercising (the IRS values the "gain" at "stock price - option exercise price" and I believe now causes mark to market at the exercise time?) which would need to be paid also. Bolt offered to loan people money to exercise their options (and pay the tax?). But if Bolt forgives the loan, the IRS will consider it as income to the loan recipient. But even then, I'd much rather have a (income tax marginal rate * loan amount) debt to pay than a (loan amount) one.
- throwaway92394 4y ago
  I'm more familiar with traditional retail options, but I'm confused. I understand why the employees would want a loan - they need money to buy the shares required to exercise the loan - and I guess they can't do it through a normal broker? If the employees Exercise-to-sell-to-cover or Exercise-to-sell they should be fine right because they would have closed the loan? This would explain why so many took the loan but so few of the layoffs were affected. Is the only issue the ones that didn't Exercise-to-sell? I understand that tax will need to be paid but I'm not sure what benefit they'd have would be? Unless, its because the capital gains + loan rate < income tax?
  - chris11 4y ago
    It's short term capital gains vs long term. If you don't exercise and just sell short term capital gains tax applies. If you exercise ISOs and hold long enough you pay AMT, which can be refundable, and LTCG when you sell the shares.
    - throwaway92394 4y ago
      What happens if they waive the loan? Does it count as LTCG + the income tax on the loan amount?
      - chris11 4y ago
        I'm not sure what exactly would happen, but forgiven debt is usually taxable.
  - s1artibartfast 4y ago
    Bolt isn't public so there is no sale option. You have to pay to exercise, pay taxes, and pray for a sale option some future date.
    - JumpCrisscross 4y ago
      > Bolt isn't public so there is no sale option Private shares are actively traded. Bolt chose to restrict its employees from being able to sell.
      - throwaway92394 4y ago
        Forgive me if this is a dumb question - Assuming you're an employee with a relatively small number of shares (in terms of company control) - what's the point of shares if you can't sell them? Just _in case_ you can sell them later? Some type of dividend/profit sharing (which seems unlikely for a startup)?
        s1artibartfast 4y ago
        Yes, the main value is that maybe you can sell them someday. This is why it is incredibly stupid that the IRS makes you pay taxes when you get them.
- neetdeth 4y ago
  > I'd much rather have a (income tax marginal rate * loan amount) debt to pay than a (loan amount) one. Depends on your ability to pay. In some cases a large debt to a corporation is far preferable to a small debt with the IRS.

Stock options (sometimes?) have an exercise date. If you don't exercise by that date, you give up on the options. But some of them would incur a tax liability at option exercising (the IRS values the "gain" at "stock price - option exercise price" and I believe now causes mark to market at the exercise time?) which would need to be paid also. Bolt offered to loan people money to exercise their options (and pay the tax?). But if Bolt forgives the loan, the IRS will consider it as income to the loan recipient. But even then, I'd much rather have a (income tax marginal rate * loan amount) debt to pay than a (loan amount) one.

throwaway92394 4y ago
I'm more familiar with traditional retail options, but I'm confused. I understand why the employees would want a loan - they need money to buy the shares required to exercise the loan - and I guess they can't do it through a normal broker? If the employees Exercise-to-sell-to-cover or Exercise-to-sell they should be fine right because they would have closed the loan? This would explain why so many took the loan but so few of the layoffs were affected. Is the only issue the ones that didn't Exercise-to-sell? I understand that tax will need to be paid but I'm not sure what benefit they'd have would be? Unless, its because the capital gains + loan rate < income tax?
- chris11 4y ago
  It's short term capital gains vs long term. If you don't exercise and just sell short term capital gains tax applies. If you exercise ISOs and hold long enough you pay AMT, which can be refundable, and LTCG when you sell the shares.
  - throwaway92394 4y ago
    What happens if they waive the loan? Does it count as LTCG + the income tax on the loan amount?
    - chris11 4y ago
      I'm not sure what exactly would happen, but forgiven debt is usually taxable.
- s1artibartfast 4y ago
  Bolt isn't public so there is no sale option. You have to pay to exercise, pay taxes, and pray for a sale option some future date.
  - JumpCrisscross 4y ago
    > Bolt isn't public so there is no sale option Private shares are actively traded. Bolt chose to restrict its employees from being able to sell.
    - throwaway92394 4y ago
      Forgive me if this is a dumb question - Assuming you're an employee with a relatively small number of shares (in terms of company control) - what's the point of shares if you can't sell them? Just _in case_ you can sell them later? Some type of dividend/profit sharing (which seems unlikely for a startup)?
      - s1artibartfast 4y ago
        Yes, the main value is that maybe you can sell them someday. This is why it is incredibly stupid that the IRS makes you pay taxes when you get them.
neetdeth 4y ago
> I'd much rather have a (income tax marginal rate * loan amount) debt to pay than a (loan amount) one. Depends on your ability to pay. In some cases a large debt to a corporation is far preferable to a small debt with the IRS.