Summary
Incentive stock options and alternative minimum tax
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Extract
ISOs and the AMT.
While incentive stock options may seem like an ideal corporate perquisite, they can also trigger alternative minimum tax consequences that can minimize their advantages. This article examines the interplay between ISOs and the AMT and offers planning strategies.
Companies are offering a number of incentive packages as a means of attracting and retaining key employees in today's tough market. One type of incentive plan allows employees to share in the benefits of company ownership. There are many plan variations available to companies seeking to offer their employees this type of opportunity, including employee stock purchase plans, stock appreciation rights, options to purchase stock at a set price in the future and many others. Each plan type carries unique tax consequences for the employee and employer. SOPs can have some unique twists. In a basic SOP, an employee is granted options to purchase company stock at a fixed price in the future. The taxation of the option grant, option exercise and the subsequent sale of the stock depends on whether the option is an NQSO or a statutory ISO. NQSOs vs. ISOs NQSOs ISOs are afforded special tax treatment under Sec. 422. NQSOs are stock options that ar...See the full content of this document
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