[bourgeoismedia]

If you held the preferred shares while you were a resident of California, why shouldn't you be subject to California CGT when you realize the gain in proportion to the length of your residency, just like if it were deferred employment compensation (taxed by CA in proportion to workdays in CA vs workdays elsewhere) or real estate (taxed in full by CA)?

Why should VCs get a tax preference employees don't get?

[solidsnack9000]

Yeah, it's weird that in California that if one does an in-kind transaction to obtain options or shares with labor, it's treated unfavorably relative to a cash transaction for the same things. It's a regressive tax: a special case to tax working people more for gains on equity. The normal way to recognize income on equities is at the time of sale.

This is one of a few examples where California's progressive politics haven't lead to progressive policies, whereas states that are much more non-progressive in their politics -- states like Texas -- have, as a practical matter, policies that are much better for working people.

I suppose that, hypothetically, when you purchase shares with cash it's "post-tax" cash; whereas when you purchase shares with labor it's "pre-tax" labor.

[tempsy]

when you own shares as a VC it’s because you’re an investor. when you receive equity as an employee it is because it’s compensation.

when you get equity as an employee you’re taxed when you vest and when you sell. you shouldn’t be taxed when you sell by California if you’re out of state.