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Comment by yeeguy | Hacker News Reader

I'm the guy in the article. So, I got a letter from the Skype HR folks indicating that if I were to persist on the path of exercising my options, then they would: (1) exercise their right to repurchase the shares at grant-price, leaving me with net zero gain; (2) demand tax withholding on the shares, valued at fair market value (substantially higher than grant price, given that the MSFT deal had already been announced)

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.

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At a minimum, if you are concerned with a huge tax liability, exercise ONE option. And tell everyone else in your situation to do the same.

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.

It's almost like they want you to know that they are raising the price of admission to even challenge them to a fight.

Pure evil.

My sympathy. I am thinking the tax, as described by them, is not how the IRS would view it. I would imagine that you probably want all this behind you, but I would think a lawyer mightbhave a different interpretation. You would still net zero, but the tax things seems way out of left field.

Did you get the feeling before from your time there that they were this kind of people?

This sounds not only terrible but retributive. Did you know this would end this way?

>... demand tax withholding on the shares, valued at fair market value ...

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.

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