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Comment by iepathos | Hacker News Reader

Similarly, taxes are applied to capital gains when stock is sold, not when it is received or bought. The employees would not be taxed just for receiving the stock/ownership, only once they sold it and made it liquid.

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You're taxed for the value of the stock when you receive it, and you are taxed on capital gains when you sell it, if you're selling it for more than you received it.

No, you can absolutely be taxed just for receiving the stock/ownership.

If it’s not worth much and it’s spread across many employees, we aren’t talking about much.

Wrong. It will be valued at something ridiculous like 20x EBITDA (average for tech related companies) and you'll be taxed on that number.

Doesn’t that depend on who values it? Also, I get the impression they have quite a few liabilities.

In the GN interview they said they have plenty of cash.

I'm sure they'll have to write down a lot of inventory because prices went down, but for tax purposes their valuation is still going to be very high based on earnings. That's why private companies other than startups rarely go this route.

Taxes are due at vesting.

To be clear: taxes are due when you receive the shares. For options, that's when you execute/purchase your options not when they vest.

edit: (in the US at least)

The taxes can also be due when you receive your options. That can depend on if you purchase your options or if they are granted to you and entitle you to a discount.

YMMV but an NQSO purchase agreement can be your friend.

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