hard · Certified Financial Planner Tax Planning
Sarah Kline exercises her ISOs and holds them for 13 months before selling. However, the sale occurs only 18 months after the grant date.
What is the tax result of this sale?
- The sale is voided under Section 422 and must be rescinded to avoid penalties.
- She pays capital gain tax but is denied the Minimum Tax Credit recovery.
- It is a qualifying disposition because she held the shares for more than one year after exercise.
- It is a disqualifying disposition, converting the bargain element into ordinary income.
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