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Author: ValereFan Two stars, 250 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: IPO shares Date: 12/27/2006 2:29 PM
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Hi all,

If anyone's knows where I can find this answer or what it is (preferable the where, as in which publication) I would appreciate.

If a person has options for a start up company and the excersize the options, I know normally the company would withhold taxes (on the difference between grant and strike price) and I believe at least with a public company the person owning the options has created a tax liability once this transaction takes place (regardless of if they sell the shares or not).

First, is that true and this creates a tax liability?

Second, what happens if this is instead of a public company it is a small company with no liquid market? Now are taxes due? It seems it isnt really any benefit until there is some market at which these can be sold.

PS, the valuation of the options would be done by a third part Investment Banking firm (that is where the pricing/gain is calculated off of).

Any help? Thanks in advance.
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