Pre-IPO: Early-Exercise Options

Unexpected Risks Of Early-Exercise Stock Options This is premium content

Terence Kelly and Jamison Klang
Companies grant early-exercise stock options mainly to limit the taxes you will pay at exercise or later at the sale of the stock. However, these options can have negative tax consequences in a disqualifying disposition (e.g. an early sale). This article reviews the tax effects of early-exercise incentive stock options and compares the tax results to those of early-exercise nonqualified stock options.
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