ISO: DISQUALIFYING DISPOSITION
01.Core Concepts
• Selling stock acquired from an ISO before two years from grant date or one year from exercise date • Loss of favorable tax treatment • Appreciation over exercise price at exercise date = ordinary income (reported on W-2) – no FICA • No withholding requirement for ISOs • Appreciation after exercise date = capital gain (short/long based on holding period beginning at exercise date) • Employer has a tax deduction equal to the executive’s W-2 income