Tax Facts

7545 / What is an incentive stock option?

An incentive stock option is an option to purchase stock of a corporation granted to an individual in connection with employment by that corporation (or its parent or subsidiary corporation), if all of the following requirements are met:

(1) The option is granted pursuant to a plan that specifies the number of shares to be issued and the employees or class of employees to receive the option. The plan must be approved by the stockholders of the corporation within 12 months before or after the date the plan is adopted;

(2) The option is granted within 10 years of the date the plan is adopted or approved by the shareholders, whichever occurs first;

(3) The option must, by its terms, be exercisable within 10 years of the date it is granted;

Tax Facts Premium Tools
Calculators
100+ calculators specifically designed to help you easily assist clients with specific planning situations and calculations.
Practice Guidance
Designed to help you discover new ways for which to build and maintain client relationships.
Concepts Illustrated
Specifically designed to help you easily assist clients with specific planning situations and calculations.
Tax Facts Archives
Access to the entire library of Tax Facts dating back to 2012 allowing you to look up the exact tax figures from prior years.