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Comment by technofiend | Hacker News Reader

And you owe taxes on it, regardless. I heard some sob stories from the brokers at Charles Schwab after Enron went under - energy traders who had borrowed heavily (on margin) against positions that were now worthless. Oy.

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Yes, "wait a year" fixes most of these problems.

Well no, it depends on what you are waiting on.

Some of the worst horror stories are from people that exercised their options and then waited a year to sell the stock to qualify for long term capital gains. Then the stock subsequently crashed so they owed a massive AMT tax for the difference between strike price and price on exercise and got almost nothing from the actual stock sale.

Better to have a huge AMT tax bill than a huge AMT tax bill and a $2000/month Lamborghini payment.

You are talking past hueving. The huge AMT tax bill could literally follow you around the rest of your life. It is a much higher order problem than blowing money on a car. The last several years I have had 7-figure tax bills due to AMT calculations on options. Good problem, right? Maybe, maybe not. If I had exercised and held, I would be bankrupt. Instead I exercised, sold enough to pay taxes right then, and didn't get hosed when the stock dropped steadily just before every open trading window. I also didn't buy a Lamborghini, but that's beside the point.

I guess I'm trying to say "wait a year... after actually having the cash in hand". But yeah, AMT sucks.

US tax law is bonkers

A consumption tax solves it. Someone buys a Lamborghini, they pay tax on it. They save the money, they pay nothing. But taxation is power, government can play favorites by using tax laws to reward contributors.

Consumption taxes are regressive and disproportionately hit the poor (who spend all their money) much more than the rich (who save most of it).

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