Should I donate stock from ISO or ESOP exercises?

June 20, 2005

Date:   Mon, 30 May 2005
From:   Peter

We exercised ISOs in June, 2004 by swapping shares obtained through an ESOP and held for the required period. Now we would like to donate some of the stock to a qualified charity. Rather than donate the ESOP shares, it seems smarter to donate the ISO shares once we pass the required holding period in June, 2005. Then we will hold ESOP shares with a high basis (resulting in a lower tax when we sell them) and receive a tax deduction at fair market value for low basis ISO shares. Have I missed anything?



Date:   Fri, 10 Jun 2005

Hello Peter,

If you paid an AMT relating to the exercise of the ISOs, you won’t be able to recover the AMT credit if you donate or otherwise give away the ISO shares. Also, company shares distributed from an ESOP typically have a low carryover basis, which is the amount the ESOP paid for the shares.

Good luck!

Mike Gray

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