Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions.

Incentive Stock Incentive stock options (ISOs) are often granted to key employees. ISOs are taxed in a favorable manner.  The granting of the option and its exercise are not taxable events for regular income tax purposes, but the exercise of the option is a taxable event for purposes of the AMT.  Proceeds from the sale or exchange of the stock will be taxed as a capital gain, provided the stock is sold or exchanged after it has been held for at least two years from the date the option was granted and one year from the date it was exercised. If the stock is not held for the required period, the sale or exchange is treated as a disqualifying disposition, and the employee is taxed at ordinary income tax rates on the difference between (1) the option price paid for the stock and (2) the lesser of the fair market value at the time of the option exercise or the sale price.  A number of requirements must be met for stock options to qualify as ISOs.  In addition, an annual $100,000 exercise limit applies.

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