According to the most recent client alert by Fenwick & West LLP, the IRS has issued two forms (along with accompanying instructions) that corporations must use to satisfy the return and information statement requirements under IRC Section 6039:
- Form 3921, required when an employee (or former employee) exercises an incentive stock option (ISO); and,
- Form 3922, required when a corporation records a transfer of legal title of shares acquired under an employee stock purchase plan (ESPP) (including to a broker or other financial institution) when either (a) the purchase price of the shares was less than the fair market value of the shares of stock on the date of grant or (b) the purchase price was not fixed or determinable on the date of grant,
The alert lists the information required by the new forms, including, respectively, the fair market value of a share of stock on the date the ISO was exercised and the fair market value of the stock on the date of purchase by the transferor under the ESPP. A good, continuing business opportunity for BV appraisers: In its “closing note,” the alert advises corporations to (i) discuss the FMV of common stock throughout the year with employees, to assist with estimated tax determinations on exercising an ISO, and (ii) value common stock delivered on the exercise of a non-qualified stock option for withholding tax purposes.
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