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Value of stock options paid in kind

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P

peteriskeller

Guest
i received stock options for a startup company that couldn't afford to pay me. The options were not intended as full compensation, just something they could do. my contribution was generally considered a volunteer with some compensation with stock options.

the company was virtually bankrupt by the end of last year,... though it has not filed. I nonetheless want to claim the income just in case they ever come back...

how do i value these options?
1. at the strike price per share x no. of shares?
2. portion of my work that they were supposed to be paying for?
3. total value of the corporation in 2001 when i received them divided by total number of shares outstanding.

It doesn't seem right to value them by the value of my hours b/c they are woth almost nothing....

thanks!
 


L

loku

Guest
Here are the rules relating to nonstatutory stock options:

Option with readily determined value. If you receive a nonstatutory stock option that has a readily determined fair market value at the time it is granted to you, the option is treated like other property received as compensation. When the property becomes substantially vested, you must include its fair market value in your income for that year.


Option without readily determined value. If the fair market value of the option is not readily determined at the time it is granted to you (even if it is determined later), you do not have income until you transfer or exercise the option. The amount to include in your income is the difference between the amount you pay for the property and its fair market value when it becomes substantially vested. Your basis in the property you acquire under the option is the amount you pay for it plus any amount you must include in your gross income under this rule.

If you want more detail and examples, or if your option was a statutory option, I suggest you see IRS Publication 525, Taxable and Nontaxable Income, which you can download for free at the IRS site at: http://www.irs.ustreas.gov/forms_pubs/index.html
 

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