| Year-End
Stock Option Planning Strategies |
Your clients with
Incentive Stock Options (ISO's) may have a planning
opportunity that will disappear once the clock strikes
midnight on December 31st. As the end of the year
approaches, right now is an excellent time to review
your client's stock option holdings. Using the simple
2-step approach below, you can identify situations that
will help option holders to make timely, prudent and
tax-efficient decisions.
- Obtain the client's "Grant Summary Statement"
(available from their HR department). Create a
"Personal Option Profile©" with the demo or full
version of StockOpter® Insight. The client's "Option Profile" will
identify the types of grants they have (i.e. ISOs,
NQSOs, or RSPs) and whether action should be
considered by comparing the downside risk to the
upside potential for each grant.
- Clients with ISOs have four specific planning
strategies that may minimize the tax impact of
exercising and selling.
- Exercising ISOs to the AMT Limit: If the
client's Regular Federal Income Tax exceeds their
Tenative Minimum Tax they will be able to exercise a
certain number of ISOs without triggering an AMT
liability.
- Taking Advantage of "Mature" ISO Shares:
The sale of ISO shares that have met the holding
period requirement can trigger an AMT deduction
resulting in the opportunity to exercise more ISOs
tax free and/or to utilize a Minimum Tax Credit
Carryforward.
- Disqualifying Disposition Analysis: If
ISO shares have been exercised and held in one tax
period, a substantial decrease in stock price can
lock in an AMT liability that is greater than the
value of the shares. This can be mitigated by
selling the held shares prior to year-end in the
year of exercise. This is called a disqualifying
disposition.
- Early Next Year Planning: The earlier in
the year ISOs are exercised to start the 1-year
holding period, the more time one has to observe the
stock to make a decision on whether a disqualifying
disposition is prudent.
If you are
interested in providing a year-end ISO analysis for your
clients, we have two ways to support you:
- StockOpter® Pro: Software that will enable you to analyze
the four ISO planning issues described above.
StockOpter® Pro is currently priced at $995, but
until the end of November the year-end planning price
is $795. To order contact us at
877-728-5964.
- Planning Assistance: We can also prepare a
year-end ISO analysis for you for $295. You will need
to provide us with your client's grant data and tax
assumptions. Click
here for a sample of this analysis. For more
information or to order this analysis contact Bill
Dillhoefer at 541-383-3899.
For other
"tips" on year-end stock option planning visit the
"Financial Planning" section of MyStockOptions.Com.
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