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Comment by exithrowaway564 | Hacker News Reader

I joined as a regular non-manager, non-lead employee. Actually, I started as an intern, and was offered a full time job immediately after that. I was employee #~100. I sold 1625 shares in a secondary round for $14,000. When the company eventually exited, I sold 27,375 shares for $1.1M. I have 1000 shares remaining. If I hadn’t sold anything, my shares would be worth about $5.1M today.

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Curious why you have 1,000 shared remaining? Are you still employed there?

Also, what was the tax bill on the $14k and $1.1M in terms of percentage? Was it long term capital gains 15% fixed?

I am no longer employed there. I hold them mostly for nostalgic purposes. I sold all of my shares because it seemed foolish to have 100% of my net worth in one company. Holding 1000 shares feels okay. Tax bill was ~0 on the $14K and my marginal tax rate on half (I’m Canadian)

How do you not owe any tax on $14,000 income? Is that some Canadian benefit?

When a Canadian has $14,000 in capital gains, their tax liability is calculated as: $14,000 * 50% * marginal tax rate. The 50% is basically the Canadian way of taxing capital gains lower than earned income.

What GP was trying to convey, albeit in a slightly confusing fashion, was this:

1. He had $14,000 in capital gains

2. No tax was directly accessed against this $14,000 amount, in other word: "tax bill was ~0 on the $14K".

3. The taxable portion of his capital gains was $14,000 * 50% = $7000

4. He paid his marginal tax rate on the taxable portion of his capital gains ($7000)

Sorry, yeah, could have been a lot more clear there. I was making extremely little salary at the time of the secondary, so I paid something like 20% tax on half, for about $1400 in taxes on $14k proceeds.

Wise move. Better to sell if off, to avoid "all eggs in one basket" and have the basket fall.

20% earned in a probability friendly way, is much better than 100% in a low probability way (as very high chances would have been of it nearing 0%)

FYI, in the US there is the Qualified Small Business Stock exemption, which can significantly reduce the tax owed on the sale of stock of a company that was once small. It can be publicly-traded at the time of sale.

Back when I was a tax lawyer, you could exclude 50% of your gain, though the rules may have changed. Also, if you rolled over your gains into other “qualified small businesses”, you could defer taxation altogether.

Does this exemption qualify if selling a business that has no stock, just a standard asset sale?

It applies only to the sale of stock, as the name implies. One can restructure an asset sale as a stock sale in order to take advantage, if the tax benefit is big enough.

Not sure what you mean about a business that has no stock (sole proprietorship?).

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