This is often repeated wisdom, and it is quite wrong.<p>If the liquidity event involves the public stock market in any way e.g. IPO, merger, acquisition with a nontrivial part of the proceeds paid in shares of a public company - then you are <i>forced</i> to execise on one hand, and have a lock-up period, usually 6 months, forced by the underwriters or SEC rule 144.<p>That is, there is a mandatory 6 months wait between the forced exercise and the effective liquidity event.<p>This applies to investors as well as employees, BTW: I was bitten by this as an investor -- a modest 5X return on investment after 2 years turned out to be less than 2.5X return (still nice), but the taxes were paid on the 5X numbers, and the end result net of taxes was therefore 1.1X -- and it would have been a loss if everything happened in the other half of the year (luckily, I was able to net the gains with the losses because the 6 month lockup was april-october; but had it been october-april, even that wouldn&#x27;t have been possible).<p>In two other tax regimes I&#x27;ve operated in, you are only ever assessed taxes in the event you can take money into your pocket. The US system is ridiculously unfair in this sense.