Qualifying disposition
Certified Financial Planner glossary · Certified Financial Planner
Definition
A sale of incentive stock option shares more than two years after grant and more than one year after exercise.
Qualifying disposition in plain English
An employee exercises incentive stock options and sells the shares, hoping for capital-gain treatment instead of a disqualifying ordinary-income mess. A qualifying disposition is a sale of ISO shares more than two years after grant and more than one year after exercise. Both timing tests must be met. Selling inside either window is the disqualifying path that usually pulls bargain-element income into ordinary treatment, so count both clocks before celebrating LTCG.
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