[zaroth]

The one question in my mind the whole time which the article doesn't answer, is if you exercise options and buy unregistered stock with has a current FMV in excess of the strike price--a taxable gain--but then within the 5 year deferral period the company dissolves in a puff of smoke, making the stock you hold actually worthless... do you still owe the tax?

Seems to me that a key advantage of the deferral period would be if it allowed one to net out the true capital gain/loss if you actually sold or otherwise disposed of (e.g. it became worthless) the stock within the deferral period.