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Comment by eanzenberg | Hacker News Reader

If you’re hitting ATM you’re doing extremely well for yourself and are privileged.

You seem to be unfamiliar with the AMT trap? I would recommend Googling it. It impacts people who are not well-off prior to exercising their options by triggering AMT upon exercise.

Right, but why exercise the option without next selling it? If you’re quitting, that’s a risk. And AMT is applied on the gains. So your strike is $1, valuation currently at $100 and you pay tax on the $99 gain. Unless it’s Theranos that valuation wont go back to $1, so yes, you’re privileged.

You need to read up on the issue. Links to get you started:

- https://www.holloway.com/g/equity-compensation/sections/the-...

- https://thestartuplawblog.com/immediately-exercisable-isos-t...

In private companies, you often are unable to sell your shares because it requires board approval. The AMT trap, in oversimplified terms, is being wealthy enough on paper, due to shares, to trigger AMT but unable to sell shares to cover the taxes.

Because you literally can’t sell it. This is why we people get stuck at startups. You must immediately exercise upon leaving but cannot sell, incurring huge tax bills but zero cash in your wallet.

If you are rich you can afford it. If you aren’t, you are forced to take zero.

This entire subthread is about "people who are doing well" getting shafted.

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