
Handcuffed to Uber - bigredtech
http://techcrunch.com/2016/04/29/handcuffed-to-uber/
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bigredtech
What is the argument for AMT on ISO's? The Uber employees would own an asset
which is not liquid, but a tax on them as if they were. And, if investors are
buying preferred shares and not common stock which the employees own, how is
the fair market value of the ISO's determined?

Just curious if someone can make an argument on the positives of AMT
holistically.

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prostoalex
Lack of AMT on ISO exercise creates a bunch of tax loopholes.

Imagine a family member transferring a large family asset to the next
generation by treating the asset as a corporation which keeps issuing new
shares. If shares are transferred as-is, the recipient would have to treat
their value as income, so instead the corporation issues a bunch of ISOs and
allows the recipient to exercise those.

If the shares are never sold, the recipient avoids income tax and estate tax
on a fairly large wealth transfer.

> if investors are buying preferred shares and not common stock which the
> employees own, how is the fair market value of the ISO's determined?

IRS code section 409a. Companies typically hire 409a evaluators who have data
on companies with similar metrics. But from employee's standpoint it's
basically the strike price of ISOs issued to someone who'd join today.

