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Subject:   Question related to ISOs and acquisition
Date:   Wed, 29 Dec 2004
From:   Brian

Hi Michael,

I work for private company X that was acquired by public company Y. I had ISOs for 20,000 shares of X, which were not exercised. When Y acquired X, all ISOs for X were exercised and were given to me part in cash, part in Y stock.

I understand that I have to pay tax for the cash portion that I received, but do I have to pay tax on the stock part, too?

Thanks,
Brian

Answer

Date:   Fri, 07 Jan 2005

Hello Brian,

It depends on the type of acquisition. If it was a purchase, and not a stock-for-stock reorganization, the stock is probably taxable. Your employee benefits department should be able to tell you the consequences of the transaction. Usually they issue a lot of paperwork for transactions like these.

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.