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Chris Giampapa April 05, 2018
It's tax season, friends! That's right, time to break out the W2's, 1099s, K-1s, and the rest of the alphabet soup that only your local accountant can decipher. Though EquityZen is proud to help shareholders get liquidity and investors into private companies, these events may have unique implications on your taxes. This is part two of a two-part series on the subject.
Chris Giampapa March 29, 2018
Within 30 days of receiving your stock following your option exercise (or RSU settlement), you’d make an election on a company-provided form. The election procedures are the same as under Section 83(b). Your stock will then be treated as “deferral stock,” potentially deferring income taxes for up to five years.
Sally Software started as an engineer at a successful private technology company in 2014. After four years, Sally has vested RSUs worth $100,000, that are then settled for $100,000 in company stock. Sally makes an 83(i) election. Sally pays no income taxes on her RSUs in 2018, 2019, 2020, or 2021. When her deferral period ends in 2022, her shares are worth $500,000, and she holds them for two more years, selling the shares from her 2014 RSU award in 2024. Sally pays ordinary income taxes on $100,000 in 2022 (when her deferral period ends) and long-term capital gains taxes on $400,000 in 2024.
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