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Could an ex-employee of a company find themself stranded with shares they cannot sell (and a tax bill)?
It would take an unusual situation.   They exercise certain types of option, which come in as regular income rather than capital gains, and are holding the stock "long" (perhaps they are not allowed to sell because of an insider-trading freeze window; like right before earnings announcements).  And then the stock tanks.  Their company is acquired.   They get stock options in their unicorn at $1/share, which blows up to $1000/share right as HugeFirm buys it. Options are swapped dollar-for-dollar for HugeFirm stock (at $250/share) so 4 shares for 1.   I heard this happened a lot in the 1999-2000 boom/bust.   And the problem was, this type of stock-option had historically only been offered to $20-million salary CEOs and CFO's, who retained professional legal and financial counsel and knew how to deal with the pitfalls and traps of this type of option.  During the dot-com boom, it was also offered to rank-and-file $50k salary tech employees who didn't even know the difference between a 401K and a Roth.   And it exploded in their faces, making a big mess for everyone including the IRS -- now struggling to justify to Congressmen why they were collecting $400,000 in taxes on entirely phantom, never-realized income from a 24 year old tech guy earning $29k at a startup and eating ramen.  When that poor guy never had a chance of understanding the financial rocks and shoals, and even if he did, couldn't have done anything about it (since he wasn't a high executive involved in the decisions).  And even the company who gave him the package didn't intend to inflict this on him.  It was a mistake.  Even the IRS dislikes no-win situations.   Some laws got changed, some practices got changed, etc. etc., and the problem isn't what it used to be.