For a refresher on incentive stock option terminology, please see the earlier post.
Let’s consider a case in which an ISO is exercised in one year and a disqualifying disposition is made in a different year:
On May 1, 2004, you received an ISO grant of 1000 shares with an exercise price of $10 and it vested immediately.
On January 1, 2005, you exercised the option and bought 1000 shares. The FMV of the stock that day was $35/share.
On January 3, 2006, you sold the stock for $45 per share.
In this case, you held the stock long enough …Read More