M&A: Taxes

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My Company's Being Acquired: What Happens To My Stock Options? (Part 3)

Richard Lintermans
Part 1 looked at the importance of your option grant terms. Part 2 examined the acquisition's terms and the valuation of your company. Now let's look at the tax treatment.

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What's the tax treatment of my stock options in an acquisition?

This depends on how stock options are treated under the terms of the deal. For example, if you are receiving for your options...

What is the tax treatment of my restricted stock in an acquisition?

This depends on how restricted stock (or restricted stock units) is treated in the acquisition. For example, if the vesting is accelerated, then you will be...

How can tax consequences to the buying and selling companies in an acquisition affect the treatment of my stock options?

The buyer and seller may try to structure the transaction so that one company...

Does the accelerated vesting of my stock options, restricted stock, and/or performance shares in a change of control or termination have any tax impact on me, such as for ISOs and golden parachute payments?

With stock grants of normal size, you face no tax impact beyond the standard tax treatment. ISOs may be converted to NQSOs should any acceleration of vesting cause...

One year after the acquisition, under the deal's terms I was granted additional shares in an earnout for my company's meeting of performance targets. How are these additional shares taxed?

This structure is more common in acquisitions of private companies or small public companies than in acquisitions of big public companies. Since the grant of the additional shares is tied to performance, the value is taxed as...

In an upcoming merger, the acquirer will pay cash for my outstanding NQSOs and ISOs. Can I avoid some of the Social Security and Medicare taxes by exercising vested options now?

When stock options are bought by the acquirer without any exercise, the resulting gain is treated as...

Can the annual limit of $100,000 in exercisable ISOs be adversely affected by any post-grant events, such as job termination or the acceleration of vesting in a merger?

One barrier to maintaining ISO status is any acceleration of your vesting that causes more than $100,000 of the grant's value to be first exercisable in...

I exercised ISOs and am hoping to wait 12 months before selling to get the favorable ISO tax treatment. What happens in a cash M&A deal when I'm trying for the one-year holding-period mark but the buyer pays cash for the stock? Is there any way around incurring a disqualifying disposition?

If, as is normally the case, you have no power to refuse or delay your stock sale, no exception...

I bought stock in my company's ESPP and am hoping to wait 12 months before selling to get the favorable ESPP tax treatment. What happens in a cash M&A deal when I am trying to reach the one-year holding-period mark but the buyer pays cash for the stock before then? Is there any way around a disqualifying disposition?

Assuming you have no power to refuse or delay your stock sale for cash, there is...

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