[mbesto]

So this can totally screw you if:

Day 0 - Company is worth $1B (pay $10k)

Day 365 - Company is worth $2B (pay taxes on $10k in "income")

Day 900 - Company sells for $50M (your stock is probably worthless due to liquidation preferences)

[overdrivetg]

My understanding is that Day 0 is the only important day here (or actually, Day 365 doesn't matter). You pay $10K on Day 0 and you earn no "income", so you do not owe any tax.

On Day 900, if your shares are worthless, you can then take that $10K as a long-term capital loss. If and how that can carry forward is something you'll want a tax accountant for.

Here's some of what the IRS has to say about that, but of course - Get an Accountant: https://www.irs.gov/uac/irs-reminds-taxpayers-they-can-use-s...