ISO $100,000 Limit

[jpod]

If you grant 10,000 options at $20/share which are all immediately vested and subject to no conditions whatsoever, but only 5,000 are exercisable immediately and the other 5,000 are not exercisable until the next calendar year (or later), can all 10,000 qualify as ISOs or only 5,000?

[401 Chaos]

JPOD,

I do not recall specific guidance from the IRS on this but 422(d) speaks in terms of when the ISOs first become exercisable rather than when they vest. Although it is rare to see vesting and exercisability separated, I would think doing so would permit you to treat all as ISOs under your facts--seems to me the limit is more there to cap the total potential value going to an individual in the form of ISOs in a particular year rather than to regulate vesting per se.