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Basic Tax Law That Every Start-Up Must Know: the 83b Election
- swombat 18y agoPlease don't use all-caps in post titles...
- alain94040 18y agoDoesn't everyone know this? That's the best deal I know for getting stock in startups. Don't get options, get stock with a vesting schedule. Get it at fair price when it's super-cheap (a few cents per share). Buy the stock outright for fair market value, therefore you pay $0 in taxes.
- anamax 18y agoPurchase also starts the clock for determining the difference between long- and short-term capital gains. This is (currently) a big deal for federal income tax. Taxes on the difference between the purchase price and the "value" on the purchase date is what caused a lot of people problems during the dot-bomb. They exercised in the money options, owed taxes, and couldn't pay them when the stock price dropped. (Many of them were trying to hold out for long-term capital gains rates. Oops.) Note that CA taxes both long- and short-term capital gains at the same rate. Jim Clark says that's why he no longer lives in CA.