Had the choice for other exits. Wanted to retain the equity, so payed the bill.
Most people advised me to give up some shares, or find a third-party to front the cash and split the upside — both more rational choices than the one I took.
Presumably still has the shares and the paid tax bill on them, so hardly “out $300K” any more than they’d be “out $300K” if they bought $300K of $AAPL.
83b election is good advice, though, especially for very early stage (low strike price) companies.
Many early stage companies will have early exercisable options (wherein you can exercise the options [paying the strike price] prior to the grant vesting, meaning you forfeit the shares if you leave before vesting). On those, you can do an early exercise and make an 83b election.
I've heard of a situation where people exercised their options at the stock's high point (because of the 90-day limit, or just plain ignorance), but by tax time the stock had dropped precipitously because of an accounting revenue recognition scandal.
Even though they didn't sell their stock at a loss, they were forced to sell a big part of their holdings to meet their tax bill.
But, worst of all, the stock rebounded the next year.
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I had other friends that exercised their stock, knowing full well they'd have to sell some at tax time to pay their taxes. What they didn't count on was getting promoted to the C-Suite and ending up LOCKED OUT of selling stock.
They told me the story of this huge tax bill (which they could have comfortably paid if they could sell), and a huge penalty for paying them late. I'm not a tax person by any means but I suggested they _donate_ stock to charity.
Turns out it was a good idea. With their tax accountant's guidance they were able to donate stock at the current value, realize the deduction and offset their gain. Problem solved.
(Again, I'm _NOT_ an accountant. Don't try this on your own at home. Only attempt in the presence of a qualified tax accountant.)
You could transfer the stock to a DAF (donor advised fund). I'm familiar with Fidelity's offering for this service, but others offer it as well. The tax benefit is immediate, and you can then disburse the funds/assets to charitable causes on your own schedule.
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[ 4.4 ms ] story [ 34.6 ms ] threadMost people advised me to give up some shares, or find a third-party to front the cash and split the upside — both more rational choices than the one I took.
83b election is good advice, though, especially for very early stage (low strike price) companies.
afaik 83b only applies to recently acquired stock, not options.
Even though they didn't sell their stock at a loss, they were forced to sell a big part of their holdings to meet their tax bill.
But, worst of all, the stock rebounded the next year.
---------------------------
I had other friends that exercised their stock, knowing full well they'd have to sell some at tax time to pay their taxes. What they didn't count on was getting promoted to the C-Suite and ending up LOCKED OUT of selling stock.
They told me the story of this huge tax bill (which they could have comfortably paid if they could sell), and a huge penalty for paying them late. I'm not a tax person by any means but I suggested they _donate_ stock to charity.
Turns out it was a good idea. With their tax accountant's guidance they were able to donate stock at the current value, realize the deduction and offset their gain. Problem solved.
(Again, I'm _NOT_ an accountant. Don't try this on your own at home. Only attempt in the presence of a qualified tax accountant.)
https://www.fidelitycharitable.org/guidance/philanthropy/wha...
(not a financial advisor/planner, not financial advice)
If a company grants me 10 years to exercise after leaving and they get acquired, what is my situation? Do I get a pay out?