Morrison & Foerster : Legal Updates & News : Legal Updates : Annual Reporting Obligation for Incentive Stock Option Exercises

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Annual Reporting Obligation for Incentive Stock Option Exercises

January 2006

This is a reminder that annual information statements must be delivered to all employees that exercised incentive stock options ("ISOs") during the last calendar year. An employer is required to deliver an information statement to each employee (who exercised an ISO) no later than January 31 of the calendar year following the year in which the ISO was exercised. The statements to employees must be sent to them at their last known address and the statement must include the following information:

(i) the employer’s name, address, and taxpayer identification number;

(ii) the name, address and taxpayer identification number of the person to whom the ISO shares are transferred;

(iii) the name and address of the corporation the stock of which is the ISO shares (only if different from the employer);

(iv) the date the ISO was granted;

(v) the date the shares were transferred pursuant to the exercise of the ISO;

(vi) the fair market value of the stock on the date of exercise;

(vii) the number of shares transferred upon exercise of the ISO;

(viii) a statement that the option was an ISO; and

(ix) the total cost of the ISO shares.

To assist in complying with the requirements of Section 6039 of the Code, we have prepared the attached form of information statement: Individual Statement of Information Regarding Exercise of an Incentive Stock Option.