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Use family’s help to lower tax on nonqualified options

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If you're one of the big wheels at your company, you may be in line to receive either qualified or nonqualified stock options. Qualified options (also known as "incentive stock options") have a tax edge.

Reason: The tax on the options is deferred and option holders can benefit from favorable capital gain treatment. On the other hand, nonqualified options are taxed when they're exercised. But nonqualified stock options can provide planning opportunities that aren't available with qualified options.

Strategy: Arrange to receive nonqualified stock options, and then transfer them to family members in lower tax brackets. That can save estate tax in the future as well as income tax when the stock is sold. Unlike qualified stock options, you can transfer ownership rights to nonqualified options right from the outset (assuming your employer allows this).

Here's the whole story: A nonqualified stock option is generally ...(register to read more)

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