Should an ISO sale be reported as wages on form W-2?

April 12, 2004

Subject:  ISO
Date:  Thu, 1 Apr 2004
From:  Bernard


I am working with a client that exercised ISO’s 2 1/2 years after the grant date and performed a sale of those options on the same day. The gain on the sale is being reported on his W-2 as wages and considered a disqualifying transaction. Is that correct?

Baltimore, MD


Hello Bernard,

Yes. Look at Internal Revenue Code Section 422.

Good luck!

Mike Gray

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

Comments are closed.