ISOs are only available to employees not non-employee directors or independent contractorsand there are mathematical limitations on the amount of an option that can qualify as an ISO. The problem is that this statement, while technically true, is not complete—because the spread on non exercise of an ISO is an alternative minimum tax adjustment. Thus, depending on the particular circumstances of the optionee exercising an ISO, the alternative minimum tax due as qualified result of the exercise can be non significant.
Please see the article I wrote on this point. No, there is no nonstatutory on the receipt of an NQO as long qualified the exercise price of the stock option is equal to the fair market value of the stock on the date of grant. The spread on exercise—meaning, the amount by which the fair market value of the stock at the qualified of exercise exceeds the exercise price—is ordinary income, non subject to ordinary income and wage witholding.
Your capital gains holding period does not start until you exercise the stock option. Google Twitter Facebook Tumblr LinkedIn 5 Responses to "Nonqualified or Nonstatutory Stock Options" By Michael Andrews May 3, - 5: Where is that to be found in the Internal Revenue Code?
That is correct James. Once you exercise your NSO, you then start your capital stock holding period. So after you exercise your stock option and buy the stock, then you begin your holding period for capital gains. So, nonstatutory you hold your stock for at least 1 year and 1 day starting the day after you exercised your option, then you dispose of it, you can still qualify to pay the capital gains rate rather than ordinary income rate because of the fact it was a long-term capital gain.
Is the receipt of a nonqualified stock option taxable? What are the tax consequences of exercising a nonqualified stock option? When does my capital gains holding period start on options option shares?
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