On November 1, 2017, I am granted 80,000 ISOs that vest over four years (with a one year cliff). The strike price is $3.
On November 1, 2018, 20,000 of the options vest. The FMV has grown from $3 to $5.
I opt to utilize the following clause in the option agreement:
Payment of the Exercise Price can be done by surrendering of other Shares which (i) shall be valued at its Fair Market Value on the date of exercise, and (ii) must be owned free and clear of any liens, claims, encumbrances or security interests, if accepting such Shares, in the sole discretion of the Administrator, shall not result in any adverse accounting consequences to the Company.
- What is the maximum # of shares I can own without spending any cash out of pocket?
- What will my tax liability be?