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Qualified Small-Business Stock rule helps Silicon Valley workers save millions

nytimes.com

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Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#41

Post by walshemj »

outericky wrote: post #3
tlb wrote: post #2

It's not a loophole, it's a specific tax break for people cashing out of "small" businesses. ("small" means at the time you joined -- it can have grown huge since.) QSBS can save you a lot, but it can be a lot of work to file too. I ran up about $20k in accountant bills doing it on a complex deal. If you're selling founder or early-employee stock, ask your accountant if QSBS is right for you.

Seriously... not a loophole. Explicit tax rule. Just making it look like people are somehow taking advantage of the system. FUD.

To modify an older UK saying "nothing so sanctimonious as a newspaper journalist"

The original is about a certain police force and was by Winston Churchill

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#42

Post by walshemj »

ForHackernews wrote: post #10
tlb wrote: post #2

It's not a loophole, it's a specific tax break for people cashing out of "small" businesses. ("small" means at the time you joined -- it can have grown huge since.) QSBS can save you a lot, but it can be a lot of work to file too. I ran up about $20k in accountant bills doing it on a complex deal. If you're selling founder or early-employee stock, ask your accountant if QSBS is right for you.

It does seem like taking the piss for a multimillion dollar startup to qualify as a "small business". Just because you're staying within the letter of the law doesn't mean it's not a loophole -- arguably that's exactly what a loophole is. According to the article, professional accountants consider this scheme dubious.

You know startups start you know start small Apples initial seed capital was a few thousands I believe.

The UK has something similar for small companies the EMI share schemes - all of the employees where I work have these options.

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#43

Post by walshemj »

dvduval wrote: post #34

Yoda, why is the need for acceptance of self-rationalization so strong in this the thread?

So steeples fingers exactly why do you think its wrong to reward risk - there are good economic reasons for taxing capital gains differently to income and its due to the increased risk.

Or do you have a political argument against this? don't forget this is not just the Zuckerberg's of this world its ordinary developers like you and me

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#44

Post by walshemj »

ahelwer wrote: post #38
dvduval wrote: post #34

Yoda, why is the need for acceptance of self-rationalization so strong in this the thread?

Complete absence of humanities education ensures software engineers can justify damn near anything to themselves as long as they benefit from it. Very useful trait to have, in a workforce.

And given the preponderance of traditional liberal arts types in the City and Wall Street your basing this assertion on ?

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#45

Post by walshemj »

jandrese wrote: post #19
kreetx wrote: post #6

Earlier quoted context omitted.

When you join the company needs to be valued less than $50 million (by the article), the price of the actual stock doesn't matter.

So like Eric Schmidt could use this if he cashed out his Google options?

He was to late - someone Like Mat Cuts could have

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#46

Post by ericd »

dang wrote: post #14
asr wrote: post #12

Earlier quoted context omitted.

The New York Times headline uses the word “loophole.” It’s not appropriate to rewrite that headline simply because you don’t like it. If “loophole” were an incorrect choice of words it would not be in the headline. EDIT to add I understand moderation is a thankless job and thank you for doing it. But I disagree with this particular call.

HN title moderation is more consistent than it may appear. It all follows from the guideline: " Please use the original title, unless it is misleading or linkbait; don't editorialize. " ( https://news.ycombinator.com/newsguidelines.html ) Submissions should stick to the original title—submitting an article doesn't confer the right to change it to suit one's opinion. But we make exceptions for misleading titles and li…

Excellent points, and excellent work moderating, thanks for all you do.

I think the point about the headlines being the one thing everyone reads is especially important for everyone to realize, and I wish the people coming up with titles would realize and take seriously the huge responsibility they have, not just for the number of clicks they garner, but also the fact that very often people read that as the summary and internalize it as fact. Every time the writers stretch the truth to get more clicks, they’re doing slight harm to huge numbers of people.

Thanks for keeping this corner of the internet a bit cleaner of that.

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#47

Post by techslave »

jameslevy wrote: post #37
akavi wrote: post #18

Earlier quoted context omitted.

Both the 50 M$ valuation rule and the 5 year clock start time apply when the stock is exercised. Note, however, that the "valuation" from a QSBS perspective is usually significantly less than the PR valuation you hear when a startup raises a round (which assumes all shares are valued at the new preferred share price)

The five year clock starts when you early exercise and file an 83b with a vesting schedule, or would the clock start only once the stock has vested? I think it's the former, when you early exercise, but the language seems a bit confusing.

about a year ago i received 2 opinions from 2 very well regarded CPAs that the 5 year clock starts at exercise, including early exercise.

however, as this is an anonymous forum, filled with scoundrels, tax and legal “advice” should always be ignored with prejudice. you would do well to ask an accountant or tax advisor on your own.

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#48

Post by dang »

ericd wrote: post #46
dang wrote: post #14

Earlier quoted context omitted.

HN title moderation is more consistent than it may appear. It all follows from the guideline: " Please use the original title, unless it is misleading or linkbait; don't editorialize. " ( https://news.ycombinator.com/newsguidelines.html ) Submissions should stick to the original title—submitting an article doesn't confer the right to change it to suit one's opinion. But we make exceptions for misleading titles and li…

Excellent points, and excellent work moderating, thanks for all you do. I think the point about the headlines being the one thing everyone reads is especially important for everyone to realize, and I wish the people coming up with titles would realize and take seriously the huge responsibility they have, not just for the number of clicks they garner, but also the fact that very often people read that as the summary a…

The problem is systemic. Those tricks work in the short term, forcing everyone to use them. The long term costs are externalities.

HN is in a special position, maybe even a unique one. If it were a standalone business we'd have to optimize for traffic, not curiosity. It's only because HN is part of YC that it can be HN.

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#49

Post by ericd »

dang wrote: post #48
ericd wrote: post #46

Earlier quoted context omitted.

Excellent points, and excellent work moderating, thanks for all you do. I think the point about the headlines being the one thing everyone reads is especially important for everyone to realize, and I wish the people coming up with titles would realize and take seriously the huge responsibility they have, not just for the number of clicks they garner, but also the fact that very often people read that as the summary a…

The problem is systemic. Those tricks work in the short term, forcing everyone to use them. The long term costs are externalities. HN is in a special position, maybe even a unique one. If it were a standalone business we'd have to optimize for traffic, not curiosity. It's only because HN is part of YC that it can be HN.

You’re right, I just hope they feel some shame as they do it. I’d hoped that trying to maintain their brand would have kept NYT from this, but it seems like no one is immune.

Re: Qualified Small-Business Stock rule helps Silicon Valley workers save millions

#50

Post by akavi »

jameslevy wrote: post #37
akavi wrote: post #18

Earlier quoted context omitted.

Both the 50 M$ valuation rule and the 5 year clock start time apply when the stock is exercised. Note, however, that the "valuation" from a QSBS perspective is usually significantly less than the PR valuation you hear when a startup raises a round (which assumes all shares are valued at the new preferred share price)

The five year clock starts when you early exercise and file an 83b with a vesting schedule, or would the clock start only once the stock has vested? I think it's the former, when you early exercise, but the language seems a bit confusing.

The former, but as the sibling comment says, if you're in this situation a your own CPA is a very worthwhile investment.
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