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Subject:   A question about ISO
Date:   Mon, 24 May 2004
From:   Lin

Hi,

My company is a private company. If I exercise an ISO, since the stock is not transferable (not publicly traded), I should not owe any AMT. Right?

Thanks,
Lin

Answer

Date:   Fri, 28 May 2004

Hello Lin,

Wrong.

The transfer is taxable in the year in which the rights in the property are transferable or not subject to a substantial risk of forfeiture. Since the shares are vested, the transaction is taxable. (Internal Revenue Code Sections 83(a), 56(b)(3).)

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.