vestingtax.com
Estimate vest tax

How are secondary sales of private shares taxed?

Secondary sales may trigger capital gain reporting and company transfer restrictions. document every step.

Rates and rules change. Check the tax year and last-reviewed date on each page, then confirm against IRS or state guidance before you file.

Spot an outdated rate or date?

We update when we can, but we miss things. Send a link to the official source if you have one.

Email us

Start here

A is selling private company shares to another buyer before an IPO. If you are selling shares you own, the gain over your basis is generally a . Company transfer restrictions and right-of-first-refusal rules often apply, so documentation matters as much as the tax math.

Why this happens

Selling shares you hold is a disposition, generally taxed as or loss versus your basis.

Your basis depends on how you acquired the shares, exercise price plus any income already recognized, for example.

Holding period determines short- vs: long-term treatment.

Private shares usually carry transfer restrictions, so the company may need to approve the sale.

What to check

  • Your basis in the shares being sold.
  • Your holding period from acquisition.
  • Company transfer restrictions or approval requirements.
  • Whether any portion is treated as compensation rather than .
  • The forms you will receive to report the sale.

Common mistake

Forgetting basis or selling without company approval: Using $0 basis overstates your gain, and ignoring transfer restrictions can derail the sale entirely.

Example scenario (hypothetical)

Illustration only, not your tax situation.

Example: Lee sells private shares acquired by exercising options. Lee's basis is generally the exercise price plus any income already taxed. The gain over that basis is reported as a , and the company's approval process must be followed.

When to get help from a tax pro

  • You are unsure of your basis.
  • The sale is large or part of a structured program.
  • Transfer restrictions are unclear.
  • Part of the proceeds may be compensation.

Related calculators

Related pages

For learning, not filing

Grants, employers, and states all differ. Use your own documents and a qualified tax professional before you make decisions from this guide.