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Date:   Wed, 10 May 2000
From:   Bruce

Is there a limit to the number of ISO's that can be granted to an employee? I have been told there is a legal limit and I have also been told the limit is up to the company. What are the facts?

Answer

Date:   Fri, 9 Jun 2000

Hello Bruce,

The maximum aggregate fair market value of stock for which incentive stock options are exercisable for the first time by any individual during any calendar year under all plans of the individual’s employer corporation and its parent and subsidiary corporations is $100,000. The fair market value for the shares is determined as of the dates the options are granted. (IRC Section 422(d).)

Any ISOs granted in excess of the limit are reclassified as NQOs. The earliest-granted options would be the ISOs.

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.