Donate mature ISO Shares

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  • #17407
    bbrazz
    Participant

    once the ISO holding period has been satisfied (2 yrs from grant, 1 year from exercise) can stock from an ISO exercise be donated to charity?

    Is the capital gain tax avoided?
    What happens on the AMT side?

    The exercise did result in AMT tax paid, and an AMT credit.

    thanks

    #17674
    Kaye Thomas
    Moderator

    ISO shares can be donated without adverse tax consequences after they mature. The tax benefits of doing so may be disappointing, however. Donating the shares avoids capital gains tax, but (depending on individual circumstances) the AMT credit can reduce or eliminate that tax on a sale of the shares. This means the amount of tax avoided by donating the shares may be smaller than expected, or even zero.

    Donating these shares doesn’t help recover AMT credit, so the benefit from doing so depends on whether there is unrecovered AMT credit, and the prospects for recovering it without selling the shares. If the owner has AMT credit that won’t be recovered without selling the shares, the special benefit that normally attaches to donations of appreciated assets will be realized only to the extent the shares appreciated further after exercise of the option.

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