# 409A valuation

> 409A valuation — An appraisal of a private company's common stock at fair market value, so options granted with a strike at or above it avoid the tax penalties of IRC §409A. A tax safe harbor; the books measure option expense under ASC 718, often starting from the same common-stock value.

Source: https://lopifi.com/glossary/409a-valuation
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**What is 409a valuation?** In accounting, 409A valuation means an appraisal of a private company's common stock at fair market value, so options granted with a strike at or above it avoid the tax penalties of IRC §409A. A tax safe harbor; the books measure option expense under ASC 718, often starting from the same common-stock value.

## Words this system refuses for it

- the valuation (the priced round sets the preferred price, not the common)

- **Category:** Equity & financing
- **Specified in:** [Lexicon](https://lopifi.com/md/docs/domain/11-lexicon)
- **Related:** expense, safe