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Stripe faces $3.5B tax bill as employees' shares expire

bloomberg.com

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Re: Stripe faces $3.5B tax bill as employees' shares expire

#341

Post by KptMarchewa »

tyre wrote: post #136
konfusinomicon wrote: post #131

Earlier quoted context omitted.

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 robber…

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.

But you can't sell those stocks/options/whatever until IPO. If you could I'd not mind.

Re: Stripe faces $3.5B tax bill as employees' shares expire

#342

Post by KptMarchewa »

ctchocula wrote: post #239
kelnos wrote: post #139

Earlier quoted context omitted.

So what? $1M in stock doesn't pay the rent. They'd still get taxed when they sell the shares.

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.

How would you pay off the loan without selling at least the interest?

Re: Stripe faces $3.5B tax bill as employees' shares expire

#343

Post by KptMarchewa »

buryat wrote: post #176
caseysoftware wrote: post #142

Earlier quoted context omitted.

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.

you can borrow against this asset and get basically a tax-free loan

Can you _actually_ borrow against completely illiquid, pre-IPO asset?

Re: Stripe faces $3.5B tax bill as employees' shares expire

#344

Post by kgwgk »

hardware2win wrote: post #339
ConcernedCoder wrote: post #207

Earlier quoted context omitted.

> Wouldnt they still be ahead? on paper, yes, you'd be ahead, but owning stock doesn't equate to cash, you'd have to liquidate by selling... in the interim, you'd still owe the tax bill, even though you haven't sold yet, and for some without the means to pay that bill, it can be a problem.

Cannot you receive stock and sell it on the next day?

If you received stripe shares today how would you sell then tomorrow?

Essentially the company is going to intermediate that sale by selling shares to external investors and buying shares from you.

Re: Stripe faces $3.5B tax bill as employees' shares expire

#345

Post by KptMarchewa »

valzam wrote: post #74
KptMarchewa wrote: post #72

Earlier quoted context omitted.

I don't understand why there's tax on unrealized gains there.

The gains are realised, you just aren't getting cash but company stock. The 'gain' is the difference between option strike price and market value of the shares. Since stripe is privat the market value is a bit murky but that doesn't deter the IRS. EDIT: spelling

How are they, if you're literally prevented from exchanging them to legal tender?

It's like taxing lottery tickets on potential win prize.

Re: Stripe faces $3.5B tax bill as employees' shares expire

#346

Post by KptMarchewa »

friendzis wrote: post #238
KptMarchewa wrote: post #72

Earlier quoted context omitted.

I don't understand why there's tax on unrealized gains there.

While I personally think there ARE gains, even if you insist on there being no gains then there is simple tax adjustment. An employee is compensated with *contracts* to buy stock. Those contracts *themselves* are valued at the strike price, i.e. an employee is accounted to gain ${strike-price} worth of value. At some point said employee decides to exercise said option contracts, i.e. convert contracts to stock. At th…

> While I personally think there ARE gains, even if you insist on there being no gains then there is simple tax adjustment.

How are those gains if you're explicitely forbidden to turn those gains into legal tender?

You'd get same tax when IPO hits - just without that earlier step.

Re: Stripe faces $3.5B tax bill as employees' shares expire

#347

Post by notyourwork »

tsunamifury wrote: post #227
notyourwork wrote: post #167

Earlier quoted context omitted.

> of working very hard, instead of coasting I work at a FAANG, not coasting and make a lot of money and have made a lot of money every year for nearly a decade. I'll continue to make a lot of money and not worry about whether my startup will or won't succeed.

I dunno if I’d be so sure of yourself if I were you.

In what way? 10 years of engineering shouldn’t instill some confidence in my skill set?

Re: Stripe faces $3.5B tax bill as employees' shares expire

#348

Post by FuriouslyAdrift »

sohtym wrote: post #299
oblio wrote: post #245

Earlier quoted context omitted.

> And when you factor in the municipal bus network, a $40k salary at Klarna in Stockholm is basically the same as a $350k salary at Stripe in the US. Sorry, I'm European but this is just silly. There's no way $40k in Sweden buys you equivalent quality of life as $350k in the US, even when taking all the welfare state factors into account.

$40k is less than the average salary in Sweden while $350k is probably at least top 5% in the US (even without all the very relevant differences). Sweden for the most part sucks these days but part of that is the idea that you can lounge through some average free education and then get $350k while leaving early on Fridays. Yes, some Americans are born wealthy and some have a lot of privilege. Everyone else, at least…

$350k is top 1%, $175k is top 5%

Re: Stripe faces $3.5B tax bill as employees' shares expire

#349

Post by s1artibartfast »

hardware2win wrote: post #339
ConcernedCoder wrote: post #207

Earlier quoted context omitted.

> Wouldnt they still be ahead? on paper, yes, you'd be ahead, but owning stock doesn't equate to cash, you'd have to liquidate by selling... in the interim, you'd still owe the tax bill, even though you haven't sold yet, and for some without the means to pay that bill, it can be a problem.

Cannot you receive stock and sell it on the next day?

No, the stock cannot be sold until stripe has an IPO. This is the bind employees are in.

Together they have a 3.5 billion tax bill, but don't have the cash to pay it and cant sell the stock.

It is like if I gave you a magic bean worth 1 billion this year, but the only magic bean buyer will come to town next year (hopefully). how will you pay your taxes.

Re: Stripe faces $3.5B tax bill as employees' shares expire

#350

Post by thrashh »

oblio wrote: post #244
thrashh wrote: post #214

Earlier quoted context omitted.

Some people love that kind of stress though. Like some people like working hard so they can up front all their work and retire earlier. And others like coasting so they can live their 20s before it’s gone. Different strokes.

True, but group A has a 1% (5%?) chance of achieving their goal while group B has a 80% (100%?) chance of achieving theirs. Always include the odds in these calculations :-)

Their goal IS the startup environment. By being in a startup, they have already achieved their goal.

This isn't tech related but I have a friend that buys failing retail businesses and fixes them. She could just chill and make a lot of money but that's just not her thing.

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