Options Trading Tutorial

Any tax implication now or future to excercise pre-IPO stock options when leaving the company now?

Hi my friend is an employee of a pre-IPO company and she decide to leave the company. She could exercise whatever has been vested. She s wondering whether she need to give gov tax for now or in the future , e.g, AMT tax. Lets say, she could exercise 1000 shares at 1 dollar. She give the company $1000 when leaves. Does she need to give any tax ? if yes what amount? note that the company is still not public yet. lets say, one yr later the company become public at the price of $10 for the 1st day. Does she need to give any tax now? How about she sell it? how about she is still keeping it ? etc.

Public Comments

1. I have no idea. Is this NSO or ISO stock? Is it restricted? If restricted, does she want to do an 83(b) election? She needs to read IRS publication 525.
2. What goes around comes around baby, and that means you too!
3. O-Kay..... 1: SHE should contact a local tax professional in her area instead of you asking in a public forum. 2. Usually, in private-held companies, once a person leaves a company, even in a Pre-IPO company, the shares are null and void. It's gone! Remember that basically the shares have no value since the comany is not publicly traded yet so the shares aren't worth anything! She should read her job contract to see what happens to her shares should she leave and the value of those shares!