in the other thread on this http://news.ycombinator.com/item?id=2691455 the article had the following line "the company's decision to repurchase would also cause a tax hit to him" - anyone know how that works?
The sum effect of 1 and 2 being net-zero gain on the shares, minus a large chunk of cash out of pocket tied up in a tax withholding account.
Terrible.
It will cost you less than $200, and it will be very annoying to Skype. It takes the same amount of paperwork and lawyer time.
Pure evil.
Income tax is only due on the portion of the asset that is not subject to a "substantial risk of forfeiture". Thus a letter claiming certainty of instant forfeiture cannot also claim income tax. (FYI, other limits to property rights, such as a lock-up agreement after an IPO, are not considered a forfeiture.)
So why did they lie to scare you out of doing something that would have been pointless? Because if they had been forced to buy back the stock at the exercise price, they would have had to pay income tax on the difference from the fair market value.