
Ask HN: Avoid Tax hit from vesting of shares? - PerfectNumber
Startup offered me shares (not options) with 3 years vesting (33.3% after each year).<p>Today shares worth nothing, but startup may accept funding and that may raise valuation.<p>My concern is whether I will be liable to pay taxes on vested shares each year even though it&#x27;s not a publicly traded company and valuation can be calculated in many ways.
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bigredtech
First, a paid lawyer who has dealt with taxes on options is the best way to
get a legitimate answer to your specific situation.

Speaking for US taxes - it depends on a lot of things. The first of which are
they NSO or ISO's? Most likely they are ISO's.

If they are ISO's, them vesting has no tax implications until you exercise
them. The company should have given you an exercise price. This is the per
option price you would pay to own the shares after the vesting date. Let's say
they gave you 1,000 options each year for 3 years at an exercise price of
$1.00. Then after that first year it would cost you $1,000 to exercise those
options. You would then be liable for AMT gains from the current fair market
value of the options minus the exercise price. Let's say that when you
exercises the 1,000 options, they were worth $2.50. Then you would have had a
"gain" of ( 2.50 - 1.00 )* 1000 = $1,500 even though you haven't sold them or
received any money. This gain is used to compute your AMT. The AMT has certain
allowances so depending on how much that "gain" is and your salary you may or
may not owe extra taxes on the gain for the current year.

If this was confusing - do some googling on ISO AMT and then contact a lawyer.

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baccredited
Don't accept any advice from your company (I have been personally burned). Pay
a pro to answer this question.

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brudgers
A related -- and perhaps bigger -- question is what are your rights and
obligations regarding selling the shares.

A smaller question is "is the company really a startup?" The granting of
shares to employees rather than options is more typical for companies
organized to produce cash flows to share holders rather than spending
available cash in pursuit of growth.

Good luck.

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abannin
This is a wonderful question for a lawyer.

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alain94040
Google 83b election if you are in the US.

