Can we avoid taxes on by transferring employee stock options shares to our children?
October 31, 2005
Date: Mon, 26 Sep 2005
We have employee stock options to purchase shares that currently are selling for $50 for $26. Can we avoid income taxes by transferring the shares to our children?
Date: Wed, 12 Oct 2005
Although you can have favorable estate planning results from transferring employee stock option shares to your children, you won’t be able to avoid the income. This is called an assignment of income, which isn’t allowed under the income tax laws. If the options are non-qualified options, you will have additional compensation income when your children exercise the options. Incentive stock options only qualify as such provided they are non-transferable other than by will or the laws of descent and distribution (IRC Section 422(b)(5)).