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Date:   18 Dec 2000
From:   Jost

I had ISOs granted in June 1996 and exercised them in January 2000, 3.5 years later. Am I still required to keep a holding period of more than one year to qualify for the lower capital gains tax rate or can I now also count the extra 1.5 years in excess of two years between granting and exercise date?

Answer

Date:   12 Feb 2001

Hello Jost,

No. There are two separate holding period requirements to be met. You have already met the first one, to hold the stock more than 2 years after the option is granted. Now you have to meet the second one, to hold the stock more than one year after the option is exercised.

Good luck!

Mike Gray

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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.