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Date:   Tue, 01 Feb 2005
From:   Anonymous

We made a cashless exercise of a private company, and received a 1099 for $46,000. The company isn't publicly traded. The exercise price was $2 per share.

How can this be possible? We only exercised because the option was expiring. If I am taxed on the $46,000, they can have the stock back.

Answer

Date:   Wed, 09 Feb 2005

Hello,

You should have gotten advice about the consequences of exercising the option. Ask the company if you can rescind the transaction. Bear in mind you are giving up an asset that could be of value if the company goes public or is sold.

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.