Incentive Stock Option Rules Are Finalized
The Internal Revenue Service (IRS) and the Treasury Department, on August 2,
2004, issued final regulations pertaining to incentive stock options (ISOs)
Treasury Department Press Release, JS-1819, Aug. 2, 2004).
The regs finalize, with only modest changes, the regs proposed in 2003. The
regs assist taxpayers in complying with the law when engaged in the transfer
of stock pursuant to the exercise of ISOs. Additionally, the final regs clarify
rules regarding employee stock purchase plans (ESPPs), sometimes referred to
as statutory options.
The final regs include a number of minor changes from the proposed regs, including
revisions to the rules regarding maximum aggregate number of shares in an ISO
plan, substitution and assumption of ISOs, and modification of ISOs.
The final regs, generally, will be effective on the earlier of January 1, 2006,
or the first regularly scheduled stockholders' meeting of the granting
corporation occurring at least 6 months after the publication of the final rule.