Options vest, but you have to exercise them to purchase the underlying shares. This is nominally cheap, but from the IRS’ perspective you have just spent $1 to purchase a share worth $100, so that’s $99 of income. Multiply by a large number of options and you can easily have a real multimillion dollar tax bill even though you have no way to sell the shares to recoup their value.
Worse, if the company loses its value before you can sell, you’re still out those taxes with zero recourse. It’s an enormous risk.
If you leave a company with vested but unexercised shares, you generally forfeit them.
Options vest, but you have to exercise them to purchase the underlying shares. This is nominally cheap, but from the IRS’ perspective you have just spent $1 to purchase a share worth $100, so that’s $99 of income. Multiply by a large number of options and you can easily have a real multimillion dollar tax bill even though you have no way to sell the shares to recoup their value.
Worse, if the company loses its value before you can sell, you’re still out those taxes with zero recourse. It’s an enormous risk.
If you leave a company with vested but unexercised shares, you generally forfeit them.