Tender Offer & Secondary Sale Calculator

A tender offer is the moment startup equity stops being a spreadsheet entry. The company, or an investor buying through the company, offers to purchase vested shares at a set price for a limited window — usually a few weeks — and for most employees it is the first and only chance to convert paper into money before an IPO or an acquisition.

The price is the same for everyone in the window. What each person keeps is not. Five colleagues can sell an identical share at an identical price on the same afternoon and walk away with five different amounts, because the tax follows what they were holding beforehand rather than what they sold. Shares owned for over a year are a capital gain. Options exercised into the deal are wages. Incentive stock options sold too early are a third thing that behaves like wages for the income tax and like something else entirely for Social Security.

The other half of the problem is cash timing. A payroll event is withheld on; a share sale is not. On three of the five paths above, the full amount lands in your account with nothing held back, and the tax on it is not due until the following April — by which time a great many people have spent it. The calculator separates the money you receive from the money you keep, because they are rarely the same number.

How this is calculated

Character first, then cash. Everything the company reports as wages has already been taxed once, so it also raises your basis and cannot be taxed a second time as gain.

1. Amount realised shares × deal price − transaction fee A broker fee is a selling expense under §1001(b): it reduces the amount realised rather than being deducted anywhere else. Company-run tenders typically charge nothing.
2. Compensation, if any NSO: full spread · ISO sold early: lesser of the gain and the discount at exercise · owned shares: none This is the fork in the road. The lesser-of rule in §421(b) is why an ISO holder whose company fell after exercise recognises less ordinary income than the raw spread suggests.
3. Basis amount you paid + compensation already recognised Under §1012 and §83(a), income taxed as wages becomes basis. Getting this wrong in the other direction — reporting a zero basis from the 1099-B — is the most common and most expensive error on this page.
4. Capital gain amount realised − basis Long-term only if the shares themselves were held more than a year. A same-day exercise-and-sell has no holding period at all, so there is nothing left over to be a gain.
5. Social Security and Medicare NSO spread only §3121(a)(22) excludes from wages any remuneration on a disposition of stock acquired under an incentive stock option or an employee purchase plan. Two identical sales differ by the whole of the FICA on this rule alone.
6. What was withheld nothing, unless the sale is a payroll event §421(b) requires no withholding on a disqualifying disposition even though the income appears on your W-2. The bill exists; the deduction never happened.

A worked example

Priya exercised 20,000 incentive stock options last year at a $2.00 strike, when the 409A valuation was $12.00. She paid $40,000 of her own money and a large AMT bill on the $200,000 spread. Ten months later the company runs a tender at $22.00 a share and she takes it.

Because she is selling inside the one-year window from exercise, the sale is a disqualifying disposition. The $10.00 per share of discount she captured at exercise stops being a capital item and becomes ordinary compensation — $200,000 of it, reported on her W-2 as though it were salary. Only the $10.00 per share the stock gained *after* exercise stays capital, and having been held under a year it is short-term, which means it is taxed at ordinary rates too.

Two things then happen that no payslip prepares her for. Social Security and Medicare do not apply — §3121(a)(22) removes statutory option stock from the definition of wages, so she pays $9,400 less than a colleague with identical non-qualified options. And nothing at all is withheld: the full $440,000 arrives in her account, against a bill of $146,030.25 payable the following April.

Waiting two more months would have made the gain long-term but not the disposition qualifying — that needs two years from grant as well as one from exercise. The calculator lets her price both.

Every figure here is produced by the same module the calculator runs, asserted on each build against a case whose arithmetic was worked by hand from the bracket tables.

What this does not model

Every calculator has a boundary. Here is where this one stops — read it before relying on the number.

• The whole sale is priced as though it happens in one tax year alongside your current salary. A tender that straddles a year end, or a salary that changes mid-year, moves the marginal rates the sale lands on.
• Alternative minimum tax is not modelled here. If you exercised incentive stock options in an earlier year you may hold an AMT credit that this sale releases, which can be worth a great deal and is a separate calculation.
• Qualified small business stock under §1202 is not modelled. If your shares qualify, a five-year hold can exclude the federal gain entirely, and selling into a tender before that anniversary is one of the most costly avoidable mistakes in startup equity.
• State tax is a single flat rate applied to ordinary income and capital gain alike. States with preferential capital gains treatment, Washington’s separate excise on long-term gains, and the sourcing rules that apply when you earned the equity in one state and sold it from another are all outside scope.
• The §1211(b) loss allowance is credited only in the year of sale. Real carryforwards continue indefinitely, so a large loss is worth somewhat more than shown — though at $3,000 a year it can take a working lifetime to use.
• Company tenders often cap participation as a percentage of your vested holding, and many have a right of first refusal or transfer restrictions that decide whether a secondary can happen at all. Those are legal constraints on the transaction, not tax ones, and the calculator assumes the sale completes as entered.
• Estimated tax penalties are not calculated. The figure shown as owed at filing is the tax itself; underpayment interest under §6654 is charged on top if you neither withheld enough nor made a timely quarterly payment.
• A secondary sold above the current 409A valuation can in some structures be treated by the company as additional compensation rather than a share sale. That is a determination your employer makes, and if they have made it, the ordinary-income paths above describe your position better than the capital ones.

Questions

Sources

Every rate and threshold used above traces to one of these. We cite the statute, the regulation, or the IRS directly — never another commentary site.

• IRC §421(b) — disqualifying dispositions of statutory option stock
• IRC §422(a)(1) — the two-year and one-year ISO holding periods
• IRC §3121(a)(22) — statutory option stock excluded from FICA wages
• Treas. Reg. §1.83-7 — taxation of non-qualified stock options
• IRC §1(h) — long-term capital gain rates
• IRC §1411 — net investment income tax
• IRC §1211(b) — limitation on capital losses
• IRC §6654 — estimated tax and the underpayment safe harbor
• Rev. Proc. 2025-32 — 2026 brackets, standard deduction and capital gain thresholds
• Rev. Proc. 2025-32 (2026 inflation adjustments) — §2.15
• Rev. Proc. 2025-32 (2026 inflation adjustments) — §2.01
• Rev. Proc. 2025-32 (2026 inflation adjustments) — §2.03
• 26 U.S.C. §1411 — Net investment income tax (statutory, not indexed)
• IRS Topic no. 751 — Social Security and Medicare withholding rates
• SSA 2026 COLA fact sheet — Social Security taxable wage base
• Treas. Reg. §31.3402(g)-1 — supplemental wage withholding

Related calculators

• QSBS Eligibility & Exclusion CalculatorSection 1202 can exclude millions of dollars of gain from federal tax entirely.
• ISO AMT CalculatorExercising an incentive stock option produces no regular taxable income and can still produce a very large tax bill.
• AMT Credit Recovery CalculatorPaying alternative minimum tax on an ISO exercise creates a minimum tax credit that never expires.
• NSO Exercise Cost CalculatorExercising a non-qualified stock option is a taxable event the moment you do it.