What do you do when you want to exercise your startup's stock options but need to borrow money to do so? Do you take an interest-free loan from your company? Heidi counsels her former student Aisha on why that may sound like a great offer, but the devil is in the details. It's likely that a loan could lead to painful financial consequences later. More Information: https://www.threshold.vc/podcast/the-case-of-the-dubious-debt
Further Reading:
Here it is, straight from the IRS, what capital gains are and the rate at which they are taxed: https://www.irs.gov/taxtopics/tc409
And also, straight from the IRS, how they look at forgiven loans as ordinary income: https://www.irs.gov/taxtopics/tc431
And here's a comprehensive Forbes article on using debt to exercise options: https://www.forbes.com/sites/brucebrumberg/2021/09/20/financing-stock-option-exercises-in-private-companies-insights-from-a-top-financial-advisor/?sh=5f1fe75f2446