H1B visa: Do I have to pay taxes on equity encashed from a company based abroad?

[pk]

@roalddahl14 , generally  grateful to my colleague @DaveF1006  for providing  needed guidance on this  issue.

I have also  responded to you PM, including a link to the relevant sections of the code -- 421, 422, 423 and 424

pk

[roalddahl14]

Dear

Dear @DaveF1006 ,

Thank you. The link you shared about ISOs states:
"Is there an annual limitation?: Yes – there is a maximum of $100,000 of stock underlying ISOs that becomes exercisable in any calendar year."

What does this mean? My equity is expected to be worth $400k after an year. So, when I dispose the shares off after holding them for one year, does this mean $300k will be deemed NQDO?

[pk]

@roalddahl14  

This is code section 422 (d).

To the extent  that the value is more than US$100,000 these  shares not ISO.   Assuming that the granting entity does not have an ESOP in place, then these would become NQSO

Suggest you pay attention to page 4 of the first document  ( IRS U-Tube /  TaxProfessional  web discussion ) that I ref'd earlier -- lot of discussion how to handle NSO ( NQSO ).

Another question that needs to dealt with is whether this should be considered as wages in kind -- i.e. the start-up paid you for your  services with stock option  ( active employment  and in-kind payment ) AND whether this took place during  your NRA status.  If that is so  then this is foreign income during NRA status and therefore not-taxable by the US.

Again this is also discussed  in that web   transcript that ref'd earlier.

Is there more I can do for you ?

[roalddahl14]

Dear @pk ,

Thank you. Yes, indeed the start-up paid me for my services with stock option AND this took place during my NRA status. The vesting continued during my RA status and I have not yet converted the vested equity to shares. What kind of documentation should I provide to IRS in my tax return to ensure I am not taxed when the company transfer the amount to my US account after the sale of shares?

[pk]

@roalddahl14  if this was  pay for your services, and during NRA days  -- this is foreign income and therefore attributable to the  year(s) of work prior to coming to the USA.  There is no US tax consequence . However, you basis in the stocks needs to be looked  at  --- grant date, exercise date or what. I need to do some research on this .

My gut says  this is probably the exercise date FMV  but I have no data  to back that us --- it is delayed  wages for work done  while NRA