I have someone coming in within the next few days with vested stock options. Without sarcastic commentary, can anyone give be a quick over-view of the different types, please?
The lack of responses means that no one on here can answer that question without sarcasm!
There are Qualified and Non-Qualified Insentive Stock Options. Be
careful in advising advising a client on cashing these in because they
can throw your client into an AMT (Alternative Minimum Tax)
situation. Go through the options with the client and their CPA.
The characteristics of these is more than we would go into out here, but you can check out this sight for basic starters.
Is it smarter to take a profit when you have it, or wait till the profit disappears so you don’t have to deal with the AMT?
Exercise an ISO at the wrong time, disqualify it, and/or create a large AMT liability by exercising in October and you will find yourself in an uncomfortable situation in spring when the CPA reviews the situation in conjuction with the clients other tax issues. The stock could go down, in which case the economic benefit of exercising may outweigh waiting...a possibile situation best discussed with the client, their CPA, and the advisor in October, not March. Its professional courtesy and the right thing to do.
The appropriate thing to do is to not offer any advice regarding tax issues.
The CPA needs to consult with a financial advisor regarding tax implications like a brain surgeon needs to consult the guy who sells the instruments.