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A comment on Stripe Faces $3.5B Tax Bill as Employees' Shares Expire. Parent comment

Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by konfusinomicon on Wednesday March 08, 2023 @10:15PM (#35077942)
the biggest joy is that you get it back in the form of a credit over several years, all the while paying interest and fees on the tax bill you cant initially pay because your "gains" are in a private company's stock that you cant sell! I've yet to get a rational explanation of why the current AMT law is fair. sure for some people it makes sense, but for the exercise of ISOs in a private company, it's basically robbery where they give you a chunk of what they stole back every year, and hopefully a liquidity event comes along sooner rather than later
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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by tyre on Wednesday March 08, 2023 @10:27PM (#35078012)
It’s fair because otherwise you could compensate people for zero tax. For example, you have a CEO that can either be paid:

1) $1m in cash

2) $1m in stock

3) an option grant to buy 1m shares at $0.000001. Each share has a FMV of $1.

Without AMT, you could always take (3) and they would get $1m of stock for $1. Tax free.

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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by kelnos on Wednesday March 08, 2023 @10:39PM (#35078069)
So what? $1M in stock doesn't pay the rent. They'd still get taxed when they sell the shares.
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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by ctchocula on Thursday March 09, 2023 @03:00AM (#35079197)
Per Buy, Borrow, Die, they could take a margin loan using that $1M and use borrowed money (say $100K) to pay the rent. With enough accumulated shares, they wouldn't need to sell the shares in their lifetime. After they've passed away, they would pay off the loan and the stock gets a free step up to the appreciated cost basis.
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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by konfusinomicon on Thursday March 09, 2023 @08:02AM (#35080764)
that's assuming the stock is actually transferable though. that day could never come
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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by KptMarchewa on Thursday March 09, 2023 @11:04AM (#35082710)
How would you pay off the loan without selling at least the interest?
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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by caseysoftware on Wednesday March 08, 2023 @10:45PM (#35078105)
With (3), they'd be taxed on the gains when they sell. Not "tax free" at all.

The difference is that they wouldn't be taxed until the gains were realized not when they were imagined on paper.

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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by tyre on Wednesday March 08, 2023 @11:01PM (#35078206)
The reason we have capital gains is to encourage investment. They're not investing $1 for 1m shares to build something better. They're getting $1m worth of something for $1, risk-free.

That gap between strike price and FMV is much more like compensation than it is an investment.

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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by buryat on Thursday March 09, 2023 @12:08AM (#35078499)
you can borrow against this asset and get basically a tax-free loan
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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by KptMarchewa on Thursday March 09, 2023 @11:09AM (#35082785)
Can you _actually_ borrow against completely illiquid, pre-IPO asset?
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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by konfusinomicon on Thursday March 09, 2023 @07:58AM (#35080712)
exactly this. tax time will come, hopefully. until then it's a tax on monopoly money.
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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by travem on Thursday March 09, 2023 @12:21AM (#35078539)
Doesn't the option have to match the FMV at the time of issuance? E.g. Option 3 would be Option Grant at FMV of $1 with that constraint
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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by KptMarchewa on Thursday March 09, 2023 @11:03AM (#35082700)
But you can't sell those stocks/options/whatever until IPO. If you could I'd not mind.
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