Will limited transferability reduce the value of my ISOs?

January 29, 2007

Date:   Thu, 09 Nov 2006
From:   Anh

Dear Michael,

I can exercise ISOs for a public company, but after the exercise I still can’t transfer the shares to anybody without the approval of my employer. “Limited transferability” is part of the ISO contract. Is the excess of the fair market value over the option price still subject to the AMT at exercise?

Thank you,


Date:   Wed, 22 Nov 2006

Hello Anh,

If you can keep the shares when you leave employment with the company, they are considered vested and the AMT will still apply. If “limited transferability” is a condition that will never lapse, it may be you are entitled to a reduction in the value of the shares that you receive.

Good luck!

Mike Gray

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