Tax consequences of backdating options

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This is not an agreement that could have been made orally.

Internal Revenue Code Section 422 Section 422 permits public companies to grant employees 'incentive stock options' (ISOs), allowing them to purchase the company's stock at a discount rate and free from taxes, unless and until the employee later sells any purchased shares.

Whether executives will be criminally liable depends on whether they were consciously trying to cover up the practice of backdating. Like securities fraud, the criminal tax fraud statutes require an intent element.

Securities Fraud The primary source of criminal liability for backdating are the federal securities acts, which regulate the sale of securities by publicly traded companies.

1995) were available to companies between 1995 and mid-2005.

I am sure that from time to time we have all come across the vexed question of backdating documents.

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