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hwarrier: "A friend of mine mentioned that it is wiser to setup a self directed IRA and buy vested (employer) stock options using that. The idea being that I will have huge tax saving. As per his calculation, the entire money that I might get after IPO will be tax free. It sounds too good to be true, so I though I will check with the experts here."

If you are discussing options that were granted to you(employee) by your employer then I am 98% sure that you cannot do as your friend suggests.

Contributions (i.e., new dollars) to an IRA must be in cash; you cannot contribute the options to the IRA. And you cannot sell the options to the IRA because that would be a related party transaction.

So how would you have your IRA custodian exercise your personal (pre-IPO) options???

Regards, JAFO

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