Facebook’s 99%: Later employees may pay almost double the tax rate

Post by ck2 » Wed, Feb 08, 2012, 5:12 PM UTC

shalmanese wrote: post #22

ck2 wrote: post #3

Meet Facebook's 1% http://news.ycombinator.com/item?id=3561273 Shows you how out of the loop I am about Facebook, I didn't even know who this was Dustin Moskovitz has a 5% stake in Facebook, which for an $85 billion company would equate to $4.25 billion. That's around $157 million for every year of his life. (if I understand it right, he only will pay 15% tax on that - and Forbes says he has 7.6% stake, not 5%)

In the movie, he was the guy trying to figure out if that chick was single or not, giving Zuckerberg the inspiration to add relationship status to Facebook.

Unfortunately I am at least two years behind on movie releases, not even sure I'd see that film anyway though.

Post by jpdoctor » Wed, Feb 08, 2012, 8:22 PM UTC

SatvikBeri wrote: post #50

jpdoctor wrote: post #49

Earlier quoted context omitted.

First, IANAL. Second: 83b election essentially says: Dear IRS, I know I received all these unvested unexercised options, but I want you to tax me on them as though they were all exercised when I received them. You do this in the year they are assigned to you. Since this is before the company actually takes funding, the shares are worth some stupidly low number ($0.001/sh). So 1M shares is $1000 of income. Since he wa…

Thanks for the explanation. I'm trying to understand whether 83b elections would apply to me-I'm an employee who received options that will vest over a certain number of years. Should I be making a 83b election every time part of my options vest? I expect the fair market value of the stock in the future to be higher than when I receive my options.

First, I am not knowledgeable enough to provide advice.

With that in mind: My experience is that it makes sense to go the 83b route before any funding rounds (when the price is 0.001 $/sh).

After that, there is usually decent money going out the door to the IRS. Since such a tiny fraction of startup shares are ever worth a damn, it just isn't worth the time, money or hassle.

Re: Facebook’s 99%: Later employees may pay almost double the tax rate

Re: Facebook’s 99%: Later employees may pay almost double the tax rate