Skip to main content

#equity-instruments

Equity Instruments

Understanding stock, SAFE notes, convertible notes, and startup financing structures

The ISO AMT Trap in 2026: How Tech Employees Get Hit With Six-Figure Tax Bills on Stock They Can't Sell

Exercising and holding ISOs adds the bargain element to AMTI on Form 6251 Line 2i, which can produce a six-figure tax bill before a single share is sold. A 2026 guide to the tightened AMT exemption phase-out ($500K single / $1M MFJ at 50¢ per dollar), the qualifying disposition rules under IRC §422, and the planning moves — AMT crossover exercise, §83(b) early exercise, same-year disqualifying sale, and multi-year laddering — that keep tech employees out of the trap.

ISO AMT in 2026: Bargain Element, Form 6251 Line 2i, and the OBBBA Phase-Out Cliff

Under OBBBA, the 2026 AMT exemption phases out at $500K single / $1M joint with a 50-cent rate, doubling the stealth bracket on ISO exercises. Here is exactly how the bargain element flows into Form 6251 line 2i, when a same-year disqualifying disposition eliminates the AMT adjustment, and how to plan exercises to avoid a six-figure phantom-income tax bill.

Section 1244 Small Business Stock: How Founders Convert a Failed Startup Into a $50,000 Ordinary Loss

Section 1244 lets eligible founders and early investors convert up to $50,000 ($100,000 joint) of capital loss on failed C-corporation stock into ordinary loss deductible against W-2 wages, freelance income, or interest. This guide covers who qualifies, the $1 million capital ceiling, Form 4797 reporting, and the formation steps that keep the deduction defensible.

Section 351 Tax-Free Incorporation: The 80% Control Test, Boot Traps, and QSBS for Founders

Section 351 lets founders incorporate without immediate tax only if the transferor group owns 80% of voting power and every non-voting class right after the exchange. Miss the control test, contribute services instead of property, or assume liabilities greater than basis, and the gain surfaces anyway. A practical playbook covering boot, the Section 357(c) trap, basis carryover under Sections 358 and 362, and how to preserve QSBS eligibility under Section 1202.

Section 368 Tax-Free Reorganizations: How Type A Mergers, Type B Stock Swaps, and Type C Asset Deals Defer Tax in Strategic M&A

Section 368 defines seven reorganization types (A through G) that defer corporate and shareholder tax in M&A. This guide covers the 40% Continuity of Interest test, Type A statutory mergers, Type B stock-for-stock swaps with the 80% control requirement, Type C asset deals, and forward/reverse triangular merger structures with their consideration limits.

Section 280G Golden Parachute Payments: The 3× Trigger, 20% Excise Tax, and the Private Company Cleansing Vote

Section 280G disallows the corporate deduction and imposes a 20% Section 4999 excise tax once parachute payments to a disqualified individual reach three times the executive's five-year average W-2 compensation, with the penalty applying to everything above 1× the base amount. Private companies can eliminate the consequences entirely through a 75% disinterested shareholder vote paired with conditional waivers signed before closing.

Section 1045 QSBS Rollover: How Founders Defer Capital Gains by Reinvesting Within 60 Days

Section 1045 lets non-corporate taxpayers defer capital gains from a QSBS sale by reinvesting proceeds into new qualifying small business stock within 60 days. After the 2025 OBBBA expansion (75M gross assets cap, tiered 50/75/100 percent exclusion at 3/4/5 years), the rollover can convert a missed Section 1202 exclusion into a deferred, and potentially excluded, gain.