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Handcuffed to Uber

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Re: Handcuffed to Uber

#2

Post by zzalpha »

I'm far more curious about what will happen when these companies start seeing significant portions of their workforce facing expiring option plans...

Re: Handcuffed to Uber

#3

Post by adam-a »

I've not been in the position of buying options before, but is that really how the tax system works? I understand you have to pay tax on income from shares, but if you're buying shares you haven't had any income from them at that point right? I would have thought you'd just pay tax on any money you received when you sold the shares. Curious to know if that's how it works in the UK as well as the US, anyone have any pointers?

Re: Handcuffed to Uber

#4

Post by vinceguidry »

zzalpha wrote: post #2

I'm far more curious about what will happen when these companies start seeing significant portions of their workforce facing expiring option plans...

The market solution here seems to be the companies poaching those employees giving them, as a hiring bonus, enough cash to exercise their shares. Not sure what would make that workable, or if it's even a big enough problem to demand such a solution.

Re: Handcuffed to Uber

#5

Post by Illniyar »

zzalpha wrote: post #2

I'm far more curious about what will happen when these companies start seeing significant portions of their workforce facing expiring option plans...

Is that a thing? I didn't know options can expire, what kind of an expiration date do they have?

Re: Handcuffed to Uber

#6

Post by [deleted] »

adam-a wrote: post #3

I've not been in the position of buying options before, but is that really how the tax system works? I understand you have to pay tax on income from shares, but if you're buying shares you haven't had any income from them at that point right? I would have thought you'd just pay tax on any money you received when you sold the shares. Curious to know if that's how it works in the UK as well as the US, anyone have any p…

[deleted]

Re: Handcuffed to Uber

#8

Post by yummyfajitas »

adam-a wrote: post #3

I've not been in the position of buying options before, but is that really how the tax system works? I understand you have to pay tax on income from shares, but if you're buying shares you haven't had any income from them at that point right? I would have thought you'd just pay tax on any money you received when you sold the shares. Curious to know if that's how it works in the UK as well as the US, anyone have any p…

Yes. It's a huge problem - the IRS demands liquid cash in order to pay tax on illiquid in-kind transfers.

The problem isn't just in startups with stock options; another big place it arises is closely held businesses. You receive the family business as an inheritance and suddenly you need to pay - in cash - 40% of the value of the business. Such a large cash hit can and does destroy many companies.

The solution is of course to require the IRS to allow payment in-kind (shares). Then you could exercise your options and hand over ~20% of your shares to the IRS. Or you could inherit the family business and give the IRS 40% of the the company (which suffers no cash flow hit and continues normal operations). This additionally would prevent the IRS from overvaluing in-kind earnings.

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