Should I exercise and hold my incentive stock options or sell them all?

May 14, 2004

Date:   Mon, 05 Apr 2004
From:   Dan

Mr. Gray,

I left a company and exercised some ISOs. I sold some shares and planned to hold some others. The company reported income on my W-2 for the shares sold, and my accountant is telling me that I owe AMT for the shares that I’m holding.

If my accountant is right, I might have been better off selling all of the shares.

Thank you for your help,


Date:   Mon, 03 May 2004

Hello Dan,

Your accountant is probably right and you might have been better off selling all of the shares. Under the recent tax law changes, more people are becoming subject to AMT. The tax advantages of ISOs compared to NQOs are now minor. You should be very optimistic about the future appreciation potential of shares received from exercising an ISO or NQO to justify holding the shares after exercising the 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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