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A verification email will be sent to your address before you can access your trial. Thus, backdating can be misleading to shareholders in the sense that it results in option grants that are more favorable than the shareholders approved in adopting the stock option plan.

A corporation merely changes the date that a stock option was actually granted to an earlier time when the visit web page price was lower.

The solution also helps defuse what Fackler describes as “an employee relations nightmare” of workers annoyed at a tax-time surprise.

But for the most part, “the same results could be achieved by employers without necessarily participating in the program,” he says. “Companies that have a lot of employees affected and that are fairly far along in the process of figuring out what options problems they have might want to participate,” she says.

The IRS provided transition rules that generally give employers until Dec.31, 2007, to bring discount stock rights into compliance with Section 409A, either by raising the exercise price to the fair-market value as of the grant date or by imposing a fixed exercise date.

Those rules don’t apply to certain discount stock rights granted to Section 16 officers, which had to be fixed by Dec. But if a discount stock right that wasn’t vested as of Dec.

Corporations, however, have defended the practice of stock option backdating with their legal right to issue options that are already in the money as they see fit, as well as the frequent occurrence in which a lengthy approval process is required.

From Fraud to Greed to Oops: IRS intends the program to minimize compliance burdens on employees who are not corporate insiders while collecting the additional taxes due. The Company has never granted or issued stock options or stock appreciation rights except in with applicable law and with an exercise price that was not less than the fair market value of the underlying Company common stock on the date the option or right was granted based upon a reasonable valuation method. As of 17 November , backdating has been identified at more than companies, and led to the firing or resignation of more than 50 top executives and directors of those companies.

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The program does that.” The IRS notice clarifies “that there was more at stake than people realized,” Olson says.

Fackler says the benefits are largely related to tax-reporting issues.

Employers will not need to issue amended W-2 forms to employees for 2006, which eases workers’ tax filings this spring for 2006.

Beyond that, Fackler says, the program is “disappointing.” “Companies were hoping for greater relief, for some wider range of remedies than paying a tax [that] the IRS otherwise would go after the employee to pay,” he says. from a tax payment perspective.” Bohmann says the program is “helpful, but not as helpful as firms had hoped,” and offers little tax savings; it merely shifts responsibility for the bill from one party to another.

“It is largely a convenience to employers and a cost-effective way of handling the claims of multiple employees, who may otherwise expect their employers to reimburse them for the adverse tax consequences that the employees suffer as a result of the employer’s backdated stock option problems,” Bohmann says.


  1. Corporate Focus Insight. Tagged fas 123r, option backdating, Section 409A requirements, stock option backdating, Two Step webinar Leave a comment.

  2. Section 409A Compliance Resolution Program for Discounted Stock Options and SARs Action Required by February 28, 2007. beneficiaries of backdating and other.

  3. Common Stock Option Valuation Under 409A - 10 years of valuation and best practices for determining fair market value of common stock of privately held companies.

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