The Tax Prophet - Incentive Stock Options ("ISO")

		Incentive Stock Options ("ISO")

ISO Defined		ISO means a special stock option granted to employees of a company as part of their compensation that has certain tax advantages.
ISO Rules		In general, there is no tax under the regular tax system upon receipt of an ISO or upon exercise of the option (converting the option into shares of stock). The Employee does not pay regular income tax until the stock is sold or transferred.
Tax Consequences		If the stock is sold more than two years after the ISO is granted and one year after the ISO is exercised (the employee has held the actual stock for one year or longer), the employee receives the preferential long-term capital gains rate on the sale of the stock.
Vesting		Most companies require that employees work for a requisite period or meet certain performance goals before they are eligible for an ISO. Once those requirements are satisfied, the options become "vested," regardless of whether or not he or she chooses to exercise any options. For additional information on ISOs and employee stock options in general, please see the Tax Prophet's section Employee Stock Options..

All contents copyright © 1995-2003 Robert L. Sommers, attorney-at-law. All rights reserved. This internet site provides information of a general nature for educational purposes only and is not intended to be legal or tax advice. This information has not been updated to reflect subsequent changes in the law, if any. Your particular facts and circumstances, and changes in the law, must be considered when applying U.S. tax law. You should always consult with a competent tax professional licensed in your state with respect to your particular situation. The Tax Prophet® is a registered trademark of Robert L. Sommers.



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