[[<<But there are specific rules that you must follow to determine the FMV of the shares when they are NOT publicly traded. So make sure that you follow the rules. You can read more about those rules in IRS Publication 550. >> Spoke to management today, and the $1.50 is a 'defensible' FMV. That's what they said the auditors said.]]Then it sounds like you're in business.[[ <<Remember also that if your options are REALLY ISOs, and not NQ options, there is no tax event (for regular tax purposes) when your exercise...but there very well MAY be alternative minimum tax issues that you have to deal with.>> Right. Got that today as well. The only taxable event is when the shares are sold.]]Then it sounds like the options are NQs and NOT ISOs.[[ What are the alternative minimum tax issues you speak of?]]Basically, you must report the difference between the FMV of the stock and the option price as a preference for AMT purposes...which will likely cause you to pay AMT taxes. It's a pretty complicated issue. There have been a number of Fools who have discussed this AMT issue in great detail, and with great insight in prior posts. You might want to look back and check them out. Or you can always check out IRS Form 6251 and the instructions for additional information.[[ <<How do you figure tax free? When you sell the shares, your monster gain will be taxed. Period.>> I'm confused. I thought any gains made within a Roth IRA are tax-free?]]They are...but how are you going to get these "options" into a Roth IRA account. The company can NOT grant the options to your Roth IRA. They must be granted to a "natural person". And, once you receive the options, you can't "roll" them over into an IRA account of any type.[[ If I were to sell my mutual fund for a *nominal gain*, and then use that cash to buy say bonds, would I be taxed?]]You are really kind of all over the board here. What does this question have to do with your options? Or your Roth IRA? Are these mutual funds inside or outside of your IRA account? Now you've got me confused. But if you SELL something (outside of your IRA account), you'll pay the tax on the gain on the sale...regardless of what you might use the funds for. [[I am using the above logic but change the mutual fund to stock (which come from exercising the options), and change the nominal gain, to monster gain. What is the difference as far as Uncle Sam is concernced?]]Sorry, but now I'm completely lost. <<[[ Oh, I'd also like put/sell this stock into my wife's Roth and daughter's Educational IRA.]] Can't do it.>> Right. But for a different reason. Even when the options are excercised, the shares are non-transferrable (barring death) while the company is privately held. << Roth and Ed IRA contributions MUST be made in cash...not in stock. >>[[ hmmmmm.....but what if I put 2'gs of cash in my Roth, and then use that cash to exercise my options. Wouldn't that work?]]Nope...your Roth IRA account can't exercise. Only YOU can exercise.Hope this helps...TMF TaxesRoy
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