What is the holding period for ISOs?
September 18, 2006
Subject: Holding Period for ISOs
Date: Tue, 05 Sep 2006
I am getting different advice from different CPAs about the holding period for ISOs. As I understand it, to avoid a disqualifying disposition, I must hold the stock beyond the later of the following two dates: (1) One year after the date the ISO is exercised; or (2) Two years after the date the ISO is granted.
Two CPAs told me I must satisfy both requirements and two other CPAs told me only one requirement needs to be satisfied.
I was granted ISOs on August 3, 2001. These shares are now 100% vested. I haven’t exercised the ISOs yet. Do I still have to wait more than one year to avoid a disqualifying disposition?
Date: Mon, 11 Sep 2006
Yes, you also need to hold the shares more than one year after exercise to avoid a disqualifying disposition.
Tell the CPAs who told you otherwise to see Internal Revenue Code Section 422(a)(1). It’s pretty clear.