Discussion:NSOs & exercising
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Revision as of 06:09, 6 April 2008 Taxwizard (Talk | contribs) (Anne, apparently) Next diff → |
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| {{ForumReplyPost|UserID=KatieJ|Date=4 April 2008|Text=Anne, these options must have been issued under a written plan, or at least authorized by the employer's Board of Directors. I'd insist on seeing the plan or other document authorizing the issuance of the stock or options before I'd assume anything. I'm not sure your client knows what kind of animal this is.}} | {{ForumReplyPost|UserID=KatieJ|Date=4 April 2008|Text=Anne, these options must have been issued under a written plan, or at least authorized by the employer's Board of Directors. I'd insist on seeing the plan or other document authorizing the issuance of the stock or options before I'd assume anything. I'm not sure your client knows what kind of animal this is.}} | ||
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| + | {{ForumReplyPost|UserID=Taxwizard|Date=6 April 2008|Text=Anne, apparently the employer was not aware of the 83(b) election. Suggest having an amended W-2 issued.}} | ||
Revision as of 06:09, 6 April 2008
Discussion Forum Index --> Basic Tax Questions --> NSOs & exercising
Discussion Forum Index --> Tax Questions --> NSOs & exercising
| 3 April 2008 | |
| Hi Everyone,
I have a question that I should know, it's just late and I'm having a hard time. A client exercised Nonquals and did not sell them. They spread is not in the W-2 code V, or anywhere. He filed an 83(b) election during the year. Do we need to pick up the difference between the purchase price and the FMV? I get so confused on these sometimes. Thank you! | |
| 3 April 2008 | |
| Good morning! Just checking if anyone has any advice on this.
Thank you! | |
| April 3, 2008 | |
| If it's unrestricted, then it's to be in the W2 comp already. If restricted, not until substantially vested. | |
| 3 April 2008 | |
| Recipient recognizes no income at the time an option is granted.
When the recipient exercises the option, he/she must recognize ordinary income equal to the difference between: (i) the fair market value of the shares purchased by exercising the option and (ii) the exercise price paid for the shares; provided, shares are not subject to a substantial risk of forfeiture – usually in the form of company repurchase rights. The fact that they are “restricted” i.e., cannot be sold is not controlling. If client filed an 83(b) then it doesn't matter if the shares are subject to a substantial risk of forfeiture - must recognize ordinary income. Company is entitled to a deduction for the amount that recipient is required to recognize as ordinary income. The fair market value of the shares acquired on exercise of option becomes the basis in the shares. When recipient sells the shares they will generally recognize capital gain or loss on the difference between the amount for which they sold the shares and their tax basis in the shares. | |
| 3 April 2008 | |
| Per my client, the employer told him to their (employer's) knowledge, there's no tax effect on either one. So the employer didn't take a deduction. It sounds like he should pick up the income as other income on page 1 of the return. Just making sure, I've got to explain to him after he's been told he doesn't have to.... | |
| 4 April 2008 | |
| Anne, these options must have been issued under a written plan, or at least authorized by the employer's Board of Directors. I'd insist on seeing the plan or other document authorizing the issuance of the stock or options before I'd assume anything. I'm not sure your client knows what kind of animal this is. | |
| 6 April 2008 | |
| Anne, apparently the employer was not aware of the 83(b) election. Suggest having an amended W-2 issued. | |
