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Subject:   Short Question
Date:   Fri, 22 Jan 2010
From:   Bruno

Hi Mr. Gray

I am employed by a pre-IPO company and was awarded X incentive stock options with a 4-year vesting plan from 2006 to 2010. I have been exercising my vested incentive stock options regularly. Now, all of my ISO have vested and been exercised.

I heard that after each exercise I should have submitted a Section 83(b) election within 30 days to get my capital gains clock ticking. I paid the AMT tax for 2008 and 2009, and will for 2010. I did not submit the AMT form for 2007 because I didn't owe the tax.

Should I have sent a Section 83(b) election to the IRS within 30 days after exercise?

Is there a problem since no AMT form was filed for 2007?

Thank you!

Kindest regards,
Bruno

Answer

Date:   5 Feb 2010

Hello Bruno,

You are okay.

No Section 83(b) election was necessary because the ISOs that you exercised were VESTED!

The AMT form is not required to be submitted, even when you exercise an ISO, when there is no AMT due and no AMT credit carryover.

Please send your questions to mgray@stockoptionadvisors.com I will answer selected questions in this newsletter.

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.