Tax consequences of backdating options

13-Mar-2017 06:51

Designated as a Tier I Issue, IRS field agents are now required to audit all transactions involving backdated stock option grants and/or backdated exercise prices.The Directive also expands the categories of options that trigger special attention to include any options that might be discounted, mis-priced, mis-dated, or in-the-money.With respect to both, there are pending parallel criminal actions as well.As most of you know, the Comverse criminal case has had a certain amount of drama surrounding former CEO Kobi Alexander, who was first a fugitive from justice, and later was located after he took up residence in Namibia, where he is presently fighting extradition to the United States.In comparison, had the options been granted at the year-end price when the decision to grant to options actually might have been made, the year-end intrinsic value would have been zero.Backdating does not violate shareholder-approved option plans.

We are currently working with a number of clients that have already received Information Document Requests ("IDR") from the IRS requesting information relating to the backdating issue.The Directive is significant, nonetheless, in that it signals a nationally coordinated effort within the IRS to target transactions involving backdated stock options, and also establishes mandatory audit requirements and centralized reporting procedures within the IRS as relating to backdated stock options.As noted below, the directive also signals the IRS's intention to pursue the issue against individuals who received such options.The idea that the rate of oil production would peak and irreversibly decline is an old one.In 1919, David White, chief geologist of the United States Geological Survey, wrote of US petroleum: "...

We are currently working with a number of clients that have already received Information Document Requests ("IDR") from the IRS requesting information relating to the backdating issue.The Directive is significant, nonetheless, in that it signals a nationally coordinated effort within the IRS to target transactions involving backdated stock options, and also establishes mandatory audit requirements and centralized reporting procedures within the IRS as relating to backdated stock options.As noted below, the directive also signals the IRS's intention to pursue the issue against individuals who received such options.The idea that the rate of oil production would peak and irreversibly decline is an old one.In 1919, David White, chief geologist of the United States Geological Survey, wrote of US petroleum: "...Backdating allows executives to choose a past date when the market price was particularly low, thereby inflating the value of the options.