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Date:   Thu, 10 Feb 2000
From:   Sathyadev

Hi,

I have a question about the NQSOs. If one is granted a certain number of NQSOs at a certain option price in a company can these be converted to ISOs at a later date, say about 6 months later? If so will the original option price be retained? What are the tax implications of this? Will the options be for all intents and purposes be treated as ISOs in the future or will taxes be owed on exercise (like NQSOs)?

-Sathya

Answer

Date:   21 Feb 2000

Hello Sathya,

Incentive stock options must qualify as such from inception.

If non-qualified options are converted to ISOs, the NQOs should be cancelled and new ISOs issued, which means the original option price probably won't be retained.

Good luck!

Mike Gray

For more information about incentive stock options, request our free report, Incentive Stock Options - Executive Tax and Financial Planning Strategies.

For more information about non-qualified stock options, request our free report, Non-Qualified 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.