market value for exercise of stock options

[taxcurious]

What is the name of your state?What is the name of your state? CO

I'm researching exercising some stock options from my work. My company is not publicly-traded so there is no published stock price. How do I find out market value to determine my income when I exercise? Note, these are non-qualified stock options.

 

[abezon]

Go see a tax pro and/or talk to the accounting dept about how much income you'll have to declare. Your company may have set a par value already.

 

[taxcurious]

market value for exercise of stock options continued

Thank you for your response. The accounting department of my employer does not seem to have a par value nor an estimate of FMV. They do not believe that I'll have taxable income on the exercise of my options. I know that I will. I have my JD and am an accountant so if there's a published formula, I could estimate it myself. But I am baffled on where I can find it. Please advise.

 

[abezon]

Well, since it's not a qualified ESOP, your taxable income is the difference between the market price of the shares & what you pay for them. If there is no readily available market value, you can use any reasonable method to estimate the FMV. Factors would include: profitability of the company, whether it's likely to go public, whether you can sell to anyone or only another employee/the company, etc. It's entirely possible that the FMV equals the option price if the shares are hard to sell.