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Subject:  Re: Determining stock options sell/exercise date Date:  1/7/2000  5:58 PM
Author:  BladeXrunners Number:  24599 of 123001

On 12/27/1999 I requested my broker do a same day sell on 600 shares of ISO stock options. My broker says the "sell" took place on 12/30/1999. My stock option adminsitrator says the "exercise" occurred on 1/4/2000.

I'm confused as you are. How is your "same day sell" structured?

I'm confused because your broker sell stocks on 12/30/99, which you don't have yet because your option was exercised until 01/04/00. I'm guessing that your broker is authorized to sell any vested shares, hold the proceed until your company "deposit" the shares exercised and receive from the broker the exercise cost--again, only guessing.

I'm presuming that this is still subject to the "constructive receipt rule" which says you recognize income in the year the income was "set aside" for you. The only exception is if this income is subject to "risk of forfeiture", then you recognize the income in the year that risk is gone.

Since the broker sell your stocks on 12/30/99, they then had "set aside" income for you in 1999. The question is whether this income is subject to risk of forfeiture, and I venture no because there's nothing to prevent the exercise of your ISO (just because your company took a couple of days long to do it doesn't you risk not being able to exercise your ISO). Thus, the income is in 1999.

(Again, I'm confused. What I see usually happen is that you exercise your stock option, then the broker sell your shares, all within the same day. Then the broker and the company settle its account a couple of days later and then the broker give you the net proceed.

Which year do I report the income -- 1