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Subject:   Pre IPO Question
Date:   Tue, 7 Sep 2004
From:   Brian

Mike,

Does an exercised option become stock? If yes, if I think a stock might split pre-IPO or shortly after, would it be beneficial to exercise some options?

Thanks,
Brian

Answer

Date:   Fri, 10 Sep 2004

Hello Brian,

Yes, when you exercise a stock option you receive company stock. And yes, in many cases, employees have found it's to their benefit to exercise their stock before an IPO because then they hope to receive capital gains for the appreciation after the public offering. (Be careful with early exercises of ISOs. See caution above.)

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.