&gt; they can roll that tax credit forward to cover future gains they may get at some other point in the future. I&#x27;m not sure how long you can roll these losses forward, but I think it&#x27;s for a substantial period of time.<p>IIRC it&#x27;s only 7 years. For people who do a lot of transaction, that&#x27;s enough. For employees that get to invest 3-4 years in a company to make a profit on equity, it&#x27;s actually quite rare to make use of this.<p>Also, everyone keeps forgetting that even liquidity-event-induced-exercise very often doesn&#x27;t come with the liquidity that makes it profitable: In the case of a public stock exchange event, the 6-month lock-up period required by SEC rule 144 (and&#x2F;or the underwriters), the stock can go down 90%, which means you pay 15-60% taxes on imaginary gain, even if you played your cards perfectly. This one also applies to investors.