Biotech Values

[exwannabe]

Re: restricted shares and tax issues

Just to expand somewhat on DDs answer.

Because the shares are granted, there is ordinary income at the time the are received. The IRS treats granted shares as if the company gave you cash and ypu then bought the shares.

For shares that may not vest, this occurs at the moment they are reasonably likely to vest (I forget the exact language).

Thus, the execs all had a tax liability, but could not sell the shares on the open market because they were restricted.

In the 2000/2001 tech crash quite a few got burned when they received stock at absurd values, were taxed at that, then the stock turned worthless. Yes, they could take the cap gains loss, but that can not offset ordinary income.

I was in this exact situation, but I was allowed to sell some of my stock when the company I worked for whent public. Else I would have been *&^%ed bad!