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Subject:   CRT and Non-qualified stock options
Date:   Wed, 21 Jul 1999
From:   Rich

I recently signed up today and I am looking forward to your article. However, I have a question which you may be of some help. In fact, my specific question is the gifting of non-qualified stock options into a CRT. I have seen articles dealing with ISO's but nothing on non-qualified. Now that there are specific rulings on gifting non-qualified options, I am considering a CRT for same. Any advice ?

Thanks.

Rich

Answer

Date:   Wed, 28 Jul 1999

Hello Rich,

Thanks for writing.

There is no particular advantage in transferring non-qualified stock options to a charitable remainder trust.

The tax advantage of contributing assets to a charitable remainder trust relates to escaping tax for "built in" long-term capital gains, which doesn't apply to non-qualified options.

Further, the ordinary income is not shifted to the trust. As compensation income, it is personal to the option holder and will be taxed to him or her when the option is exercised.

My advice is, don't contribute non-qualified options to a charitable remainder trust.

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.