How many of my CEO’s options can be ISOs?

September 18, 2006

September 18, 2006

Date:   Wed, 19 Apr 2006
From:   Roselene

I have a question regarding an ISO limitation.

My CEO got two huge grants – one last year and one the previous year, and we don’t understand which portion is an ISO and how much is an NQ stock option.


Date:   01 May 2006

Hello Roselene,

I recommend that you consult with your company’s CPA firm about this.

The maximum grant for an ISO is for $100,000 to be exercisable during a calendar year, based on the fair market values on the grant dates (usually the same as the option price). This means you have to schedule when the shares will vest.

Since an option grant can vest over many years, a “large” grant can still qualify as an ISO.

The options also have to be designated as incentive stock options in the option agreement.

If an employee stock option is not an ISO or under an employee stock purchase plan, it’s a non-qualified stock option.

Good luck!

Mike Gray

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

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