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Subject:   Shall I pay the 2004 Tax for the ISO stock option exercise
Date:   Fri, 25 Feb 2005
From:   Gordon

I quit my previous job in December, 2004. On my last working day, I exercised my Incentive Stock Option, which was granted more than four years ago. I didn't sell the shares. The company is privately held and will not go public in 2005. There is no information about the exercise on my W-2 form.

Is the exercise taxable? If so, how do I calculate the tax?

Answer

Date:   Mon, 14 Mar 2005

Hello Gordon,

Please read our report, Executive Tax Planning For Incentive Stock Options.

Your employer should have given you a document, Confirmation of Exercise of Incentive Stock Option, disclosing the excess of the fair market value of the shares over the option price. This item is reported on Form 6251, Alternative Minimum Tax, line 13. Consider getting professional help for dealing with this issue.

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.