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Hi. I worked for a startup for a few years where I "earned"

Hi. I worked...
Hi. I worked for a startup for a few years where I "earned" some stock as part of my employment. I was never issued anything, and the agreement was loose and in email. I am no longer there, but a new owner is coming in to invest in the business. I now have the option to either:
A. Take the stock I earned now.
B. Take options now rather than the stock.

I prefer option A, but am concerned about the tax implications. Based on the investments, the business is "valued" at about $400K, and I would own 4% of the company.

So will I have to pay taxes on $16K? Can I file an 83B and not pay any taxes? Any suggestions?

Thanks!
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Answered in 33 minutes by:
12/3/2012
Shane-CPA
Shane-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 265
Experience: Shane Northrop is a Certified Public Accountant, Personal Financial Specialist and a Chartered Global Management Accountant
Verified

Shane-CPA :

Hello...my name is XXXXX XXXXX I am a Certified Public Accountant. I look forward to assisting you with your tax question.

Shane-CPA :

If you hold stock in the company and are not selling the stock to the new investor, then you will not have a tax consequence. Instead, once you sell the stock you will include the gain/loss on your personal income tax return.

Shane-CPA :

in the year of sale...

Customer:

Will there be any forms I will need to submit to the IRS after I receive the stock?

Customer:

and to also clarify, I do not yet have the stock. So my concern is that if I have it issued to me (rather than options) then I might be receiving something of value in the eyes of the IRS.

Customer:

Or is there simply no value until I sell it?

Shane-CPA :

No...if the company is structured as an S-Corporation or Partnership, you will receive a schedule K-1 at the end of each tax year reporting the profit/loss for your 4% interest. You will claim that income or expenses on your personal tax return. If the company is a C-Corporation, then you will not have any taxable effect, unless the Corporation pays you a dividend or in the year you actually sell the stock.

Customer:

Great, it's a C-Corp so I should be good to go.

Shane-CPA :

Receiving the stock/Purchasing stock has no tax implication...it is when you sell/liquidate the stock that a gain/loss would be included in your tax return.

Shane-CPA :

If you choose to take a dividend out of the Corporation, you would pay tax on the dividend in that year.

Shane-CPA :

Otherwise, you are a 4% owner of the Corporation and have no tax consequence until you sell the stock.

Shane-CPA :

You're very welcome! Thank you for allowing me to assist you. If you are completely satisfied with the service I provided you today, please provide me with positive feedback so that I may receive credit for my response. If you feel exceptional service was provided, bonuses are greatly appreciated. If I can be of further assistance, please let me know. Have a great day!

Shane-CPA
Shane-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 265
Experience: Shane Northrop is a Certified Public Accountant, Personal Financial Specialist and a Chartered Global Management Accountant
Verified
Shane-CPA and 87 other Tax Specialists are ready to help you
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Hi Randy...This is Shane CPA from Just Answer. I assisted you with your question a few days ago. I wanted to follow up with you to see if my response has met your needs and if there are additional questions I can help you with.

Please let me know if I can be of service to you at any time!

I look forward to hearing from you!

Best Regards,
Shane, CPA
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Shane-CPA
Shane-CPA
Shane-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 265
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