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Subject:   NQSO
Date:   Thu, 16 Nov 2006
From:   Gary

Hello Michael: I found your name and other information on the internet. Very good info... I have a question:

My wife received a NQSO for 600 shares at $29, with an expiration date of 12/6/2015, and they are becoming exercisable on 12/6/2006, 2007 and 2008, at 200 shares per year. The stock price is now $31.

Does this mean I have to buy 200 shares by 12/6/2006, and for which the option price is $29 X -200 = $5,800, resulting in $400 of ordinary income on which income and social security taxes must be paid?

Thanks

Gary

Answer

Date:   Wed, 22 Nov 2006

Hello Gary,

The consequences of an exercise is correct. However, you don't have to exercise the option during 2006. It doesn't expire until 12/6/2015, so the last day you can exercise this option is 12/5/2015.

Good luck!

Mike Gray

For more information about non-qualified stock options, request our free report, Non-Qualified 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.