For the record it absolutely is taxed as such. As soon as it vests the IRS considers it income, whether they sell it for the cash or not.

Its a huge headache for startups sometimes. I had team members I wanted to compensate but just giving them the equity would have been an imediate big tax bill on a non-liquid, and speculative, asset. There’s ways to massage it (like vesting) but he will absolutely have that taxed.

Oh, and I could be wrong but I think the share value is just taxed as ordinary income, not capital gains. Ie: if the award is denominated in $1 shares, which he sells for $1.10, the $0.10 gets capital gain rates (if he held it for a year) but the $1 is taxed just like a paycheck.