How are you taxed if ISOs or NQSOs are subject to accelerated vesting?

Consider the same fact pattern as above but shortly after Miranda has moved to the U.S. she is notified that her employer is being acquired and that all of her awards are going to be subject to accelerated vesting.

For Miranda this means she will be forced to exercise the options contemporaneously with them vesting.

Under U.S. law a taxpayer is required to hold an asset for at least 12 months for it to be taxed at the long term capital gains tax rates, rather than ordinary income tax rates.  For Miranda, this will mean that the disposal of her shares in public co will be taxed at ordinary income tax rates because she did not hold the shares for more than 12 months.

 


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