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What are incentive stock options (ISO’s)?

Incentive stock options (ISOs) are types of employee-based compensation that is distributed in the form of stock. Incentive stock options (ISO) enable the employer to grant the employee an option to purchase stock in the employer’s corporation, or parent or subsidiary corporations, at a predetermined price, called the exercise price or strike price.

The employee will generally be able to purchase the option at its strike price once the option is available to be exercised (vested). Income from incentive-based stock options will generally be subject to both regular income tax and alternative minimum tax.

Incentive based stock options are available to be calculated if they have all of the following information:

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