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tax question- self employment tax on proceeds from non statutary stock options

  • 1.  tax question- self employment tax on proceeds from non statutary stock options

    Bronze Most Valuable Member
    Posted 03-06-2014 02:42 PM

    I would like guidance for the following transaction :

    Question:  is the following income subject to self employment tax

    Facts: 1. non employee is on board of directors of a corporation
               2. Individual received one Form 1099 Miscellaneous.  Box 7 shows $300,000   
               3. The amount is made up from:
                                                Directors Fees                                                                     $ 80,000- subject to self employment tax
                                                net proceeds - sale of non statutary stock options              $ 220,000-  is this income subject to SE tax
                  The sale of stock options was a cashless transaction.. the options were exercised and sold the same time. no income was previously reported.  The company merged and the non employee exercised the option.             

    My thought is that the net proceeds from sale of the stock options is compensation
    What is the proper tax treatment for the gain on the option?
    Can you please give me a reference to support your tax position.       

    Thank you,

    Bill Feiner                        
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    William Feiner
    WILLIAM E. FEINER, CPA PA
    Boynton Beach FL
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