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Hopefully this is an interesting question.

My sister is planning to exercise 50 of her stock options and gift them to me (hey!), the purchase price being $20/share and the current value $100/share (basis $1000 and FMV $5000). Although this is gift of stock <$10,000, does she incure a tax liability if 1) it is an SOP or 2) it is an ISO but gifted within, say, two months of purchase, and not satisfying the required holding period of two years?

In other words, does she need to hold the stock for a certain length of time after exercising the option to avoid any taxes?

Yours truly (confused) -s0graham
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