Subject:   Question related to ISOs and acquisition
Date:   Wed, 29 Dec 2004
From:   Brian

Hi Michael,

I work for private company X that was acquired by public company Y. I had ISOs for 20,000 shares of X, which were not exercised. When Y acquired X, all ISOs for X were exercised and were given to me part in cash, part in Y stock.

I understand that I have to pay tax for the cash portion that I received, but do I have to pay tax on the stock part, too?

Thanks,
Brian

Answer

Date:   Fri, 07 Jan 2005

Hello Brian,

It depends on the type of acquisition. If it was a purchase, and not a stock-for-stock reorganization, the stock is probably taxable. Your employee benefits department should be able to tell you the consequences of the transaction. Usually they issue a lot of paperwork for transactions like these.

Good luck!

Mike Gray

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