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Appreciate your final question here and I wasn't able to answer "why" but this document on page 12 https://www.irs.gov/pub/irs-pdf/p525.pdf https://www.irs.gov/
by lbotos 5y ago
Appreciate your final question here and I wasn't able to answer "why" but this document on page 12 https://www.irs.gov/pub/irs-pdf/p525.pdf https://www.irs.gov/pub/irs-pdf/p525.pdf explains that you won't pay tax on ISOs at grant. Wish there was a git blame on the file :P
I have to assume that if someone was granted a million dollars worth of gains in one year and the asset was not sellable the tax burden would probably bankrupt most people. (This is the risk of exercising options when the stock is not yet liquid anyway, "phantom tax").
- HWR_14 5y agoThanks for the link, that clarifies things so much. I had been circling around the "non-statutory options" on page 11, like you would get without the 90 day exercise clause. In that case, the taxable event is vesting (assuming the options can have a determined FMV). I see that I was confused by thinking FMV exercise price was part of the requirement to have an ISO, but instead the IRS clarifies in the middle of page 13 that any valuation below FMV is taxable on exercise (if it's an ISO, and not a nonstatutory option)