Why can’t I exercise an ISO in an IRA?

November 29, 2004

Subject:   clarification of answer
Date:   Wed, 13 Oct 2004
From:   Bob

Dear Mike,

My boss wants to know why you can’t exercise an ISO in an IRA.



Date:   Wed, 24 Nov 2004

Hello Bob,

The IRA is a retirement account that is treated as a “separate taxpayer” from the owner. In order for employee stock options to qualify as ISOs, they must be held by an employee. (Internal Revenue Code Section 422(b).) The IRS has also made it clear that you can’t assign ordinary income that you earned in addition to plan contributions to a retirement account.

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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