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Subject:  ISO
Date:  Thu, 1 Apr 2004
From:  Bernard

Michael,

I am working with a client that exercised ISO's 2 1/2 years after the grant date and performed a sale of those options on the same day. The gain on the sale is being reported on his W-2 as wages and considered a disqualifying transaction. Is that correct?

Bernard
Baltimore, MD

Answer

Hello Bernard,

Yes. Look at Internal Revenue Code Section 422.

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.