If stock is not transferable, do I still owe AMT?Michael Gray CPA, Stock Option Advisors

If stock is not transferable, do I still owe AMT when I exercise my incentive stock options?

June 23, 2004

Subject: A question about ISO
Date: Mon, 24 May 2004
From: Lin

Hi,

My company is a private company. If I exercise an ISO, since the stock is not transferable (not publicly traded), I should not owe any AMT. Right?

Thanks,
Lin

Answer

Date: Fri, 28 May 2004

Hello Lin,

Wrong.

The transfer is taxable in the year in which the rights in the property are transferable or not subject to a substantial risk of forfeiture. Since the shares are vested, the transaction is taxable. (Internal Revenue Code Sections 83(a), 56(b)(3).)

Good luck!

Mike Gray

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