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Subject:   ISO exercised upon merger of my company
Date:   Fri, 29 Dec 2000
From:   Anonymous

Dear Sir;

I received ISOs from my employer. Several months after receiving these ISOs, my company was bought by another company. I exercised my options and was then able to exchange the shares acquired upon exercise for shares of the acquiring company. Does this exchange of my shares acquired through the ISOs for shares in the new corporation (of which i remain an employee) create a taxable event?...

Thank you

Answer

Date:   12 Feb 2001

Hello,

There is usually no tax consequence from the exchange of stock or options relating to a merger, but sometimes there can be. You need to talk to the people who administer your company’s employee stock plan to find out.

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.