Taxation of an Option Exercise When the Shares are Subject to a Substantial Risk of Forfeiture | Practical Law

Taxation of an Option Exercise When the Shares are Subject to a Substantial Risk of Forfeiture | Practical Law

A Practice Note discussing the tax treatment of the exercise of a stock option where the underlying shares are subject to a substantial risk of forfeiture within the meaning of Section 83 of the Internal Revenue Code. This situation often arises when private companies retain repurchase or call rights on the shares underlying the option and may repurchase the shares for less than their fair market value.

Taxation of an Option Exercise When the Shares are Subject to a Substantial Risk of Forfeiture

by David E. Rubinsky, Simpson Thacher & Bartlett LLP, Joo Hyun Lee, Vinson & Elkins LLP, and David B. Teigman, Proskauer Rose LLP, with Practical Law Employee Benefits & Executive Compensation
Maintained • USA (National/Federal)
A Practice Note discussing the tax treatment of the exercise of a stock option where the underlying shares are subject to a substantial risk of forfeiture within the meaning of Section 83 of the Internal Revenue Code. This situation often arises when private companies retain repurchase or call rights on the shares underlying the option and may repurchase the shares for less than their fair market value.