[sb8244]

My understanding here is that you wouldn't owe taxes if you sold exercised options (at loss or even) because you would make no gains. You may even be able to write off some taxes?

I'm not exactly sure what happened with people who go bust. My guess is they could have had the type of options where you don't pay taxes up front, and then they weren't able to pay when it was finally time.

Like you, I would love to hear more about this.

[erikerikson]

Unlike the normal situation where you pay taxes when you sell an asset, with options when you acquire them any difference between the strike price and their value at acquisition is a taxable amount. If your acquisition occurs when you cannot sell because the shares are not publicly tradeable or because you are subject to a rule not allowing sales then in the time between when you acquire and when you could sell the stock can become worthless. This worthlessness has no effect on your tax bill which is finalized at the point of acquisition.

[sb8244]

Yes, this is my understanding as well. You owe a lot of taxes initially (that you to pay to even exercise) and then you wouldn't pay AGAIN if the company goes bust.

That would, of course, suck, but you wouldn't "owe more" if the company goes bust. It would just be what you already paid now being worth less than what you paid for it.

I guess I don't understand the point being made with that in mind. If you took out a loan to exercise the options (don't do that), then that would be a big problem.