My company is about to be acquired. I have both vested and non vested options that will mature shortly, and it is a cash buyout. Does anyone have any suggestions on how I can avoid all the profits to be labeled as ordinary income?
I wouldn't try to avoid the profits, I'd grab for all I could get, regardless of how they are labeled.
You might get some favorable tax treatment if your options are qualified incentive stock options (ISO), but the dual holding requirements for capital gains treatment of ISO's don't apply to your situation as you described it. You don't even state what type of options you have.
-Mark Bole
You need to clarify exactly what that means. If they are just buying out your options for cash, then you are not exercising the options. It's the same as a bonus paid in cash. It will be included in your W-2 wages and taxed as ordinary income. There is nothing you can do to change that.
Ask the company if that's what they are going to do.
Bob Sandler
Let them expire??? :) (Sorry, couldn't restrain myself...)
The only clean shot I can see is if the acquiring company has a deferred compensation plan, if their plan will let you defer a large percentage of the compensation associated with the options, and if you consider them reliable/creditworthy enough that you want to do this.
These are three big ifs, but it's not impossible. Talk immediately to those responsible, before you actually see the cash.
Steve
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