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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76392  
Subject: Re: Self directed IRA for purchasing stock optio Date: 9/17/2005 12:51 PM
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JAFO31:

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???>>>

hwarrier: "Well, I am buying the vested options from the company, so wouldn't they be shares?"

If you are buying the options, why even mention the word vested? Your use of the word "vested" in the original post, implies that the options were granted to you by the company, not that you are buying the options.

Buying options and exercising an option are two very differnt things. What exactly are you talking about?

"Although they are not shares that are traded in a stock-exchange, since the company is not public). Does a make a difference?"

Your IRA is not you, and you are not your IRA, so I do not see how it makes any difference, but I am not entirely sure that I understand what you are talking about.

Regards, JAFO

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