medium · Certified Financial Planner Retirement

The Pfeiffer household is interested in the tax treatment of Incentive Stock Options (ISOs).

Which specific calculation is most relevant for an ISO exercise strategy on the CFP exam?

  1. Determining the W-2 wage impact of the bargain element in the year of exercise.
  2. Applying a flat 20% withholding tax at the moment of exercise.
  3. Exercising up to the point where the Tentative Minimum Tax equals the Regular Tax.
  4. Calculating the full corporate AMT spreadsheet including adjusted current earnings.

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