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Subject:   full-time employee requirement?
Date:   Fri, 19 Jan 2001
From:   Jay

I am planning to reduce my hours from 40 a week to 30 or 35. My employer has said that my ISO will be taken away if I do this because of the law. Is this correct?

Thanks,
Jay

Answer

Date:   9 Feb 2001

Hello Jay,

There is no full-time employment requirement in the Internal Revenue Code to receive or retain incentive stock options. You are only required to be an employee of the corporation granting the option, a parent or subsidiary corporation of the corporation, or a parent or subsidiary corporation of the corporation issuing or assuming a stock option in certain transactions. (IRC Section 422(a)(2).)

However, your employer’s plan may place restrictions on your options beyond those in the Internal Revenue Code.

This may be a matter you need to review with an attorney.

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.