Do I need to report the exercise of a vested non qualified stock option as a consultant where the exercise price is the same as the FMV (as stated by the company)?

[kjaassoc]

It seems that if there was any differential between the exercise price and the FMV the company should have reported income in box 3 of my 1099. However, since the company stated at the time of exercise the FMV was the same as the exercise price, there was no additional income reported to me.

[TomYoung · Accepted solution]

If the real FMV of the company is the same as the exercise price - you paid that exercise price, right? - then you have no compensation, no revenue to report.  You simply bought a stock.

Of course if the IRS ever asks you've got to be able to back up that position and I don't know that "the company stated" you paid the FMV of the stock would stand up without some appraisal or other attempt to support that notion.

Tom Young

[kjaassoc]

Thank you for the quick response. Yes I paid the exercise price. The company also sold common stock for the same price/share as the exercise price around the time of exercise so that seems to validate the FMV.

[darewreckk]

What if the 409A expired and no new grants or stocks have been awarded.  Would the FMV still hold true? And if not, would you be penalized?

[darewreckk]

What if the 409A expired and no new grants or stocks have been granted.  In the case of a private company that isn't public.  Would the FMV still hold true? And if not, would you be penalized?