Not sure if this is the right sub-reddit for this type of question, but I'm not sure where else to ask. I'm planning to get in contact with a CPA next week. In the meantime, I thought I'd see what Reddit think.
CONTEXT:
I work for a private tech start up that's been around for 5 years. I joined in the first year of operation and was issued non-qualified stock options. At the time, the strike price on options for common stock, which I received, was matched to the price of the company's preferred shares. (clearly wrong in hindsight, but we didn't know better at the time)
When we finally got around to a 409a valuation, the common stock was obviously valued much lower than our strike price and are now technically underwater. As an example, the strike price on my options is $1.00 but the shares are only valued at $0.10. If this were a publicly traded company, the options would be worthless. But this is a private company where more stock can't just be bought + there's a very good chance that in 18 months these shares will be worth $4.00+ each, so they still have real value.
I'd like to execute these options in the next 6 months, which is ahead of our next valuation + allows me to hold the shares long enough to reduce the tax burden when I sell.
QUESTION:
If I exercise a block of non-qualified stock options that have a strike price of $1.00 while the shares are currently valued at $0.10, can I count the "loss" against my income tax? If I exercised options with a strike price lower than market value, I would have to pay the difference as income tax, but I don't know if the opposite is true.
BONUS QUESTION:
If I exercise two sets of options, one with the above strike price ($1.00 strike on $0.10 value) and another with a more reasonable strike price ($0.01 strike on $0.10 value), can I use the "loss" from exercising the first set of options to cancel out the second?
Submitted November 14, 2020 at 10:19PM by TaxMan9000 https://ift.tt/3kvoQFm
