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Code Section 409A and Determining Private Company Stock Fair Market Value for Granting Stock Options

Code Section 409A and Determining Private Company Stock Fair Market Value for Granting Stock Options 2025

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The document discusses the determination of fair market value (FMV) for private company stock when granting stock options, emphasizing the importance of compliance with Section 409A of the Internal Revenue Code. It outlines the criteria for reasonable valuation methods, including Safe-Harbor Methods that provide presumptions of reasonableness. The document details factors to consider in valuations and describes specific methods such as independent appraisals and illiquid start-up stock valuations. It highlights the consequences of failing to meet FMV requirements under Section 409A, including potential tax penalties.

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