Question on 409A Income Inclusion / Jan 2009

[Guest MY7056]

I had this question posed to me recently and haven’t come up with an answer. So, I thought someone here might provide some direction.

Assume a company granted a non-compliant stock option to an employee in 2006. The option is still outstanding on January 1, 2009 and has not been amended to bring it into compliance with 409A. Does 409A require income inclusion back to grant date (2006) or will the income inclusion occur in 2009, with interest and penalties going back to 2006 (or perhaps something entirely different)?

Thanks!

MY7056