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Suppose you have stocks options and then you leave the company and face an AMT trap. This can be very very bad. Crushingly bad. Why would a company knowingly su
by CalChris 6y ago
Suppose you have stocks options and then you leave the company and face an AMT trap. This can be very very bad. Crushingly bad. Why would a company knowingly subject their employees to this possibility?
Can the option part of ISO be written in such a way that you can decline the option if it is financially disadvantageous to exercise it? Is it enough for the company to grant a long exercise window, say five years along with a decline option?
- libraryofbabel 6y agoHappily that is precisely what an Option is: the right, but not the obligation, to buy a stock at an agreed upon price.
- deleted 6y ago[deleted]
- rytill 6y agoThe "AMT trap" occurs when you exercise and is calculated based on (options exercised)*(FMV - strike price). By not exercising, or exercising a small amount, you will not be subject to AMT. However, I completely agree with your sentiment that knowingly granting vanilla ISOs to early employees which require any double digit percentage of salary to exercise as they vest is quite cruel, especially those that do not understand the dynamics of the "AMT trap".