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I was recently let go from my company due to a reduction in force, and I have received a letter saying I have vested options available for exercising. Although I would like to, I cannot afford to purchase them. However, their current value is more than what they are valued when they became available.

If I simply wanted to buy and then sell them back to the company for profit, is this doable? Do I just speak with a representative of the company about this? And what parts of that sale would I be accountable for, tax-wise?

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This is called "same-day sale". If your company is publicly traded it is definitely doable through your broker. If your company is private, you'll have to ask them if it is possible, and if it is - how the process works.

Re taxes, hard to tell since you didn't mention what country you're from. But generally, in all the tax jurisdictions I know of (which is not a lot) the amount you get above the amount that you paid is considered salary in this scenario and is taxed accordingly.

  • Thank you. It is a private company, and now I know what to ask. If it helps, I am in the USA. – Jason T Featheringham Jun 26 '14 at 7:55
  • +1. Also called cashless exercise, the process is pretty standard, and in OPs case, they actually may only permit this, perhaps wishing to keep the stock amongst current employees. HR will lead him to the right guy to answer the exact process. – JoeTaxpayer Jun 26 '14 at 11:58
  • The appreciation wouldn't be salary in case of §83(b) to treat them as vested. Wouldn't usually work for options in a private company, but unvested options in a public company will usually be §83 property. The initial grant is taxable salary (and deductible to the company) but the appreciation is taxable capital gain. But if there was no valid 83(b) election, then yeah, this is just salary (taxable income as of vesting). – NL7 Jun 26 '14 at 21:42
  • I don't know why would there be a difference between private and public re §83, but I'm pretty sure the OP would have mentioned it had it been relevant. – littleadv Jun 27 '14 at 4:43
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  1. The company might be willing to repurchase the options from you. It's worth asking...
  2. If the options are transferrable, you could sell them to a private investor.
  3. Do the options expire shortly after you leave? Most do, but in case yours don't, it might be best to just hold on to them until there's a liquidity event.
  4. Failing the above, I would put as much money as you can risk into exercising a portion of the options, and let the rest expire.

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