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Incentive and non qualified stock options

  • 1.  Incentive and non qualified stock options

    Posted 8 days ago
    I have a client/ estate who inherited incentive and non qualified stock options from the death of her spouse in 2019 that are fully vested. The husband was still working for the issuer of the options at the time of death. The estate is below the threshold for taxation.
    There are several questions regarding the tax implications to both.
    1. At the exercise of the incentive options,  is the difference between the FMV and the exercise price an adjustment for AMT?
    2. Is there a different answer if exercised in 2020?
    3. Is this handled on the trust returns or individual's returns?
    4. For purposes of the estate valuation, I believe the options are considered an asset. Do they get a stepped up basis which impacts the gain on the ultimate sales of shares after the exercise of the options or any other implication ie AMT?
    5. The issuer of the options advises me that any exercise of non qualified options in 2019 will be added to his W-2 and FICA and Medicare paid as applicable. Are they correct that death does not escape employment taxes?
    6. If the exercise of the non qualified options occurs in 2020, a 1099 will be issued for the "bargain portion". Is this subject to FICA, Medicare or self employment tax?
    7. If the deceased employee was at the FICA maximum for 2019, does this effect the previous question?
    8. The widow will be filing single for 2020. If subject to employment taxes, is there a special reflection on the return since the deceased husband is not filing a return for 2020 or is this all reported on the trust return?

    I imagine other questions may arise that I have either not considered or forgot to indicate.  I greatly appreciate your assistance or guidance in these matters.

    Joel Ratzker
    631 521-5364

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    Joel Ratzker BA
    JOEL J. RATZKER, CPA PC
    Huntington Station NY
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  • 2.  RE: Incentive and non qualified stock options

    Posted 7 days ago
    There is a tremendous amount to cover in your questions.  It will take some time to cover all of your questions and issues.  I am teaching a CPE class this morning but if you wish to chat, you can call me this afternoon after 1 pm Central time. My direct line is: 214.361.1131 x 104.

    I have managed clients with ISOs NQs etc across the country over the last 20 years, taught classes and written articles on the subject.  And I have dealt with all the issues you are asking questions about.

    Steven Miller, CPA

    214.361.1131 x104
    Steve@xbrsm.com

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    Steven Miller CPA
    STEVEN E. MILLER, CPA, PC
    Dallas TX
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  • 3.  RE: Incentive and non qualified stock options

    Posted 7 days ago
    Thank you so much. I will call in the afternoon.