Can I trade my non-qualified stock options for a like investment?
August 16, 2000
Subject: Cash Buyout of my Employer
In your article entitled “Non-Qualified Stock Options Executive Tax and Financial Planning Strategies”, number 10 states:
“If an acquiring party purchases the outstanding non-qualified stock options from employees or service providers, the money plus the fair market value of any property received by the employees or service providers is taxable as ordinary compensation income…”.
In my situation, I am being forced to exercise/sell because of the cash buyout. Does the IRS have any provision for me to shift the options to a “like” investment rather than receiving the proceeds as ordinary compensation? I understand one way to do this is if options in the new company were issued in exchange for outstanding options of the old company, but I’m not being given that opportunity.
Thanks for your input,
Date: 07 Aug 2000
There is no provision to make a tax-deferred exchange of company shares received from a non-qualified option relating to a corporate buyout, except for a stock for stock exchange in a reorganization of the acquiring company.