TAXATION OF ISOs – QUALIFYING DISPOSITION
01.Core Concepts
• Grant Date • No taxable income unless exercise price is less than fair market value at date of grant. • Upon Exercise • No regular tax • AMT adjustment equal to appreciation over the exercise price (the bargain element) • Upon sale of stock (after holding period requirements) • Long-term capital gain treatment for stock appreciation over exercise price • Negative AMT adjustment • Employer does not have a tax deduction related to the ISO. • Employers do not have a withholding requirement for ISOs.