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Date:   Thu, 09 Nov 2006
From:   Anh

Dear Michael,

I can exercise ISOs for a public company, but after the exercise I still can't transfer the shares to anybody without the approval of my employer. "Limited transferability" is part of the ISO contract. Is the excess of the fair market value over the option price still subject to the AMT at exercise?

Thank you,
Anh

Answer

Date:   Wed, 22 Nov 2006

Hello Anh,

If you can keep the shares when you leave employment with the company, they are considered vested and the AMT will still apply. If "limited transferability" is a condition that will never lapse, it may be you are entitled to a reduction in the value of the shares that you receive.

Good luck!

Mike Gray

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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.