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Subject:   Non-qualified stock options in private company
Date:   Tue, 18 Dec 2001
From:   Randy

Mike,

Hello! I have a NQSO question for you. I've been browsing the internet for information on NQSOs and the tax consequences, however I have yet to find a similar situation to mine. I have a large number of stock options that will be expiring next year. I don't have the cash to pay the taxes on the gains even at the current prices (FMV) and since the stock is in a private company, the shares are restricted so I can't just liquidate an amount to pay the taxes. Any advice?

Thanks,
Randy

Answer

Hello Randy,

If you don’t have the cash to pay the taxes, maybe it’s best to pass on exercising the options.

Despite the "upside" potential, I don’t think it’s wise to put yourself in financial distress for this "benefit".

Good luck!

Mike Gray

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.