This section discusses Employee Stock Options (ESO), both
non-qualified and incentive stock options (ISO), also called statutory options.
With the exercise of ISOs, arises the alternative minimum tax (AMT) which is
discussed in a series of articles.
Television Appearances
1. CNBC - Power Lunch
- AMT/ISO Interview (3/19/01).
2. CNNfn - Tough Call - AMT/ISO Discussion - A debate regarding reforming the
AMT (7/5/01).
3. Tech TV - Corporate Tax Deductions for Non-Qualified Stock Options.
http://www.taxprophet.com/newsletters/0611nl.html
Tax Consequences of Stock Option Backdating - intermediate
A memo discussing the tax consequences arising from the current stock option backdating scandal involving hundreds of public companies, including Apple and, possibly, Steve Jobs.
Recent Congressional Fix to the ISO AMT Tax Trap - intermediate
An article describing the AMT Credit refund legislation inacted in December, 2006.
Taxation of Stock Options Transferred Pursuant to a Divorce - intermediate
A Newsletter (November, 2006) discussing the taxation of stock options transferred from the employee spouse to the non-employee spouse, pursuant to a divorce.
Subsequent Capital Losses Cannot Offset AMT - intermediate
A special edition Newsletter (May, 2006) discussing the Merlo Tax Court case. The court disallowed the carryback of an AMT capital loss to offset an AMT capital gain in a prior year.
Exercising
Employee Options, Then Borrowing Against the Stock to Pay the Tax - intermediate
An FAQ discussing the risks involved when exercising, then borrowing on margin against
the stock to pay taxes.
February, 2005 - IRS Crackdown on Executive Stock Option Tax Shelters
A memo discussing the IRS tax shelter settlement initiative involving employee stock option transfers by executives to their family-owned entities.
January, 2001 - Employee Stock Options - A primer -
Part 1 - advanced
A hot topics discussion of the tax consequences of owning employee stock options.
February, 2001 - Employee Stock Options - A primer -
Part 2 - advanced
A continuation of the January, 2001 hot topics discussion of the tax consequences of
owning employee stock options.
Taxation of Incentive Stock Options at the Time of Sale -
intermediate
An FAQ (11/01) discussing how ISO stock is taxed under the regular system when they are
sold.
Sale
of Stock Acquired Through the Exercise of Incentive Stock Options - intermediate
An FAQ discussing the rules surrounding the sale of stock acquired by exercising an
ISO.
November
26, 2000 - Tax Planning With Options - Part 2 - intermediate
An FAQ dealing with Incentive Stock Options and tax strategies on how to minimize their
adverse tax impact.
November
12, 2000 - Employee Stock Options – Year End Planning - Part 1 - intermediate
An FAQ warning of the tax problems associated with employee stock options.
Recent Congressional Fix to the ISO AMT Tax Trap - intermediate
An article describing the AMT Credit refund legislation inacted in December, 2006.
ISO/AMT Alert: IRS Issued
Notice 2004-28 (March 26, 2004), warning Taxpayers of severe penalties for frivolous tax return positions.
IRS has aggressively attacked promoters who are advising taxpayers to
misreport their income in a manner contrary to settled law with respect
to the income generated from the exercise of employee stock options.
IRS lists several well-publicized promoter theories and warns taxpayers
they could face penalties, including civil fraud and possibly criminal
fraud in connection with their tax returns, unless those returns are
amended immediately.
The Notice appears to target the Isaacson Law Firm and others who
aggressively and publicly promote some of the theories described in
Notice 2004-28, including the notion that contrary to the express
language in IRC Sec. 83 (a), employee stock options may be discounted
if there are restrictions on the sale of the stock, even if those
restrictions are termporary. See Isaacon's newspaper comments. IRS calls these theories "frivolous."
Selling
Stock After Early Exercise of an ISO - intermediate
An FAQ analyzing the interplay between the early
exercise and Sec. 83(b) election, and the holding requirements for stock
acquired through the exercise of an ISO.
Do you owe AMT? Check out Intuit's AMT Evaluator and
find out.
April, 2004 - ISO/AMT News: On April 12, 2004, Bankrate.com wrote an extensive article regarding the AMT impact on taxpayers entitled Middle-Class Taxpayers Caught In Tax Trap Set For The Wealthy.
The article also deals extensively with the AMT's impact on incentive
stock options. A must read for those caught in this trap.
September,
2002, ISO Meets the AMT - Thousands of High-Tech Employees are
Devastated - Part 2 - intermediate
Part 2 of a Hot Topics article describing the impact of the alternative
minimum tax on workers exercising incentive stock options.
September,
2002, ISO Meets the AMT - Thousands of High-Tech Employees are
Devastated - Part 2 - intermediate
Part 2 of a Hot Topics article describing the impact of the alternative
minimum tax on workers exercising incentive stock options.
August, 2002,
ISO Meets the AMT - Thousands of High-Tech Employees are Devastated
- Part 1 - intermediate
Part 1 of a Hot Topics article describing the impact of the alternative
minimum tax on workers exercising incentive stock options.
February, 2002 Hot Topics - Exercising ISOs and the AMT -
The Dual-Basis Concept - advanced
A discussion involving the basis adjustments for regular tax and AMT purposes when an
ISO is exercised and the stock is sold.
Using the AMT Credit in Future Years - intermediate
An FAQ (10/01) discussing how the AMT credit applies in future years.
September, 2001 Hot Topics - ISOs Meet the AMT, part 2
The second part of my Tax Notes article dealing with the AMT as it affects incentive
stock options. This article contains proposals to change the current law.
August, 2001 Hot Topics - ISOs Meet the AMT, part 1
The first part of my Tax Notes article dated June 18, 2001 dealing with the AMT as it
affects incentive stock options. The article traces the history of the AMT and incentive
stock options and discusses what how various tax code sections combined to create an
absurd result in which tax tax on stock received through the exercise of incentive stock
options may equal several times the current value of the stock.
January
31, 1999 - Stock Option Path to Riches - part 2 - intermediate
An FAQ discussing statutory stock options and the alternative minimum tax.
January 1999 - Stock Options - advanced
January Hot Topics discussion of statutory and
non-statutory stock options and how to minimize the tax consequences.
January
17, 1999 - Stock Option Path to Riches - part 1 - intermediate
An FAQ involving non-statutory stock options.
NOTE: Employees who exercised incentive stock
options (ISO) in the year 2000 and who now face a large alternative minimum tax (AMT)
liability should check out reformamt.org - a group of
taxpayers seeking to modify the AMT rules as they apply to ISOs.
Due to the efforts of reformamt.org, the following bills have been
introduced into the House and Senate. Both seek to retroactively mitigate the AMT
rules as they apply to ISOs exercised in 2000.
S. 1324 and HR 2794 unfortunately, these bills
never made it into law.
We are currently engaged in a series of
lawsuits against stock brokerage firms, through NASD arbitration, who
never advised, or improperly advised, their clients about the tax
consequences of exercising Employee Stock Options. If you were the
victim of bad advice, or no advice, please contact us for a free
evaluation of your case (rls@taxprophet.com).
