Date: Mon, 26 Sep 2005
We have employee stock options to purchase shares that currently
are selling for $50 for $26. Can we avoid income taxes by
transferring the shares to our children?
Date: Wed, 12 Oct 2005
Although you can have favorable estate planning results from
making such a transfer, you won't be able to avoid the income.
This is called an assignment of income, which isn't allowed under
the income tax laws. If the options are non-qualified options,
you will have additional compensation income when your children
exercise the options. Incentive stock options only qualify as
such provided they are non-transferable other than by will or the
laws of descent and distribution (IRC Section 422(b)(5)).
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.