Valuation of Stock Options

[Guest scheim]

Can anyone provide any insight as to what "readily tradable" means with respect to the valuation of stock options at fair market value on the date of grant for Code Section 409A purposes? Thanks.

[Just Me]

I have always taken this to mean that the option was actually traded on a public exchange (I see this occasionally with stock options on a foreign parent company's stock). My understanding is that it is extremely rare for an option to be considered to have a "readily ascertainable value."

[BeckyMiller]

For purposes of 409A, they are looking at the trading status of the service recipients securities, not the option. For the best discussion on whether a security is considered readily tradable on an established securities market see Letter Ruling 200052014.