Hi,
I hope someone can help me clarify how ISO spread are calculated. Currently I'm doing tax planning for 2019 tax and hope to not trigger AMT. (Because I don't I'm gonna make over $1m to phase out AMT exemption, I'll aim to incur less than $110,000 ISO spread to let the gains cancel out with the the exemption. Please correct me if I'm wrong here.)
My main question is around how ISO are calculated. Is it the spread between the follow two:
- exercise price
- fair market price at the moment of exercising
or between the following two:
- exercise price
- fair market price at YEAR END
I ask this because they can potentially favors different exercise strategy. The former would favor exercising early to take advantage of a lower fair market value. The latter could favor exercising late to reduce the risk of price increase after exercising. The above concerns private company with no shares liquidity.
Thanks for your time,
J
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