[emcrazyone]

he can't pay income tax if he's never received the income.

"I will be left with a tax bill on $10,000s of additional "income" that I never received"

[davidu]

Actually, and unfortunately, in the US, that's how it works.

His paper gains are taxed. It's not quite "income" but it's taxed that way.

[limeyx]

That actually depends on if the options were ISO's (where you'd only have to account for the spread in AMT calculations) or non-Quals where yes you'd have to pay regular tax on the spread at exercise time.

If he's really a founding engineer though he should have filed an IRS 83B election and basically paid close to zero tax on all this

[davidu]

Correct.