Recommend Our Site to Your Friends!

Print This Page

Date:   Thur, 3 Aug 2000
From:   Fernando

Michael:

The company I work for is still private. If the company offers ISOs to an employee where the exercise price is below the FMV of the common stock of the company, are there immediate tax consequences to the recipient of these ISOs?

Thank you for your time.

Regards,
Fernando

Answer

Date:   Mon, 7 Aug 2000

Hello Fernando,

There is no consequence of receiving the ISOs until they are exercised.

According to the requirements of qualifying as an ISO, the option price may not be less than the fair market value of the stock when it is granted.

People who exercise an ISO for a company whose stock is not publicly traded will still have an alternative minimum tax consequence if the fair market value of the stock received is greater than the option price.

I hope this helps.

Mike Gray

For more information about incentive stock options, request our free report, Incentive Stock Options - Executive Tax and Financial Planning Strategies.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.