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Date:   Tue, 19 Oct 1999
From:   Cheryl

Everything that I read indicates that one of the requirements to avoid a disqualifying disposition of an ISO is that you must hold the stock that you aquired for one year after the date you exercised the ISO. I understand this but wanted to confirm the definition of one year. For example, I would assume that if I exercised the options on December 20th of last year than my one year waiting period would be up on December 20th of this year. Is this assumption correct?

Thank you for your help.

Cheryl

Answer

Date:   Tue, 26 Oct 1999

Hello Cheryl,

The shares must be held more than one year.

In your example, the holding period requirements would be met December 21, 1999, provided you also held the stock more than two years after the option was granted.

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.