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Make sure you know which calculator to bring to your test. You know what they say: don't bring a buffalo chip to an Ultimate Frisbee tournament. I lost a lot of friends that day...

Sharing the Pie (Types of Stock) – Authorized, Issue, Stock Options

Dashboard > Chapter 2: Growing and Raising (Capital) > Sharing the Pie (Types of Stock) – Authorized, Issue, Stock Options

Sharing the Pie (Types of Stock) – Authorized, Issue, Stock Options

The Upside For Wu

If the company is a huge hit and Mr. Wu's options end up being worth a million dollars, after ordinary income (not buying them out), he'd keep about $500,000 in The People's Republic of New York; but if he has long term gain tax treatment on them, he'd keep somewhere around $650,000.

Alternatively if the company goes bankrupt, he loses everything. So he is making a bet of $12,500 in hopes of saving $150,000 or maybe even more in taxes.

And Mr. Wu is making a big bet on this...

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