Reducing corporate AMT on an employee's stock option exercise.

• Jurisdiction: United States
• Author: Dudzinsky, Robert J.
• Date: 01 May 1997

Sec. 421(a)(2) and (b) provide that a corporation issuing an incentive stock option (ISO) may not deduct compensation attributable to its exercise, unless the employee makes a disqualifying disposition of the ISO stock. Alternatively, if the corporation issues a nonqualified stock option (NSO), the corporation issuing the NSO can deduct its value as compensation attributable to its exercise when the option's value is included in the employee's gross income either at the time of grant (if the NSO has a readily ascertainable fair market value) or at the time of exercise. However, in the latter instance, income recognition and the corresponding deduction may be delayed if the underlying property (the stock) is not transferable and is...