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Subject:   ISO Questions
Date:   Sun, 16 Dec 2001
From:   Corey

I have a couple of questions regarding ISO's that I have to exercise by January 5 2002.

1. Should I exercise in 2001 or 2002.
   
   
2. What date is considered the exercise date for tax purposes? The date of the check. The date the check is cashed. The date received. Other?
   
   
3. How do I determine the fair market value? Is it the current option grant price, the latest round of financing share price(which was for preferred shares)? Other?

One of my concerns is AMT. Although I am not sure if I will be affected by it.

Thank you.

Answer

Date:   26 Dec 2001

Hello Corey,

I really don’t have enough information to give you advice.

Ask your company what the fair market value of the shares will be reported to be. They should know.

The exercise date is the date you notify the company that you want to exercise the option. You can "settle up" after that date.

You will probably be better off exercising during January, 2002. Then you can decide by December 31, 2002 whether you would be better off selling the stock before the end of the year.

Good luck!

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.