[scurvy]

It depends on what the actual market value of your stock is upon exercise, not just 409A. Sure, it might be the 409A value, or it could be the last sales price on something like SecondMarket. If there's a secondary private market, that will trump whatever your company says the 409A value was.

If your company says the 409A is $1.50/share but people are selling on secondary markets for $4/share, you must use $4/share when computing your exercise benefit.

If there's no secondary market, it's the last 409A value.

[redshirtrob]

This is an interesting conversation. I wish someone with readily verifiable credentials could weigh in. I'm not saying the parent, or GP do not have the credentials, just that they've not been established. I'd love to hear from an accountant or tax attorney on the topic.

From what I can tell, taxes will be based on the values in Form 3921 (for ISOs and ESPPs), which is delivered by the employer.[0]

Here's a sample 3921.[1] The FMV is delivered in Box 4. My question is where does that value come from? Is it the last 409A valuation, or is it required to use sale data from secondary markets?

I've received several of these forms over the years, and the FMV has always been the value from the last 409A. I have no idea if there was a secondary market for the shares.

[0] https://www.irs.gov/taxtopics/tc427.html

[1] https://www.irs.gov/pub/irs-pdf/f3921.pdf

[scurvy]

If you get a 3921, use what's there; the burden of accuracy is on the company.

I worked at a place that didn't issue 3921's (in the .com go round). I had a hell of a time reaching someone still at the company who could give me that information almost a year later (and after several rounds of devastating layoffs). I really don't know what she based the figure on.

[redshirtrob]

It's not a matter of if. Companies are required to issue a 3921 these days.[0] That was not the case in the dot-com days. I don't even know if Form 3921 existed then.

[0] http://www.startuplawblog.com/2011/01/05/companies-remember-...