Private Company Stock Options: Determining Fair Market Value in ...

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The Law • Covers options granted after December 31, 2004 or modified after October 3, 2004 • Covers options granted before January 1, 2005 to the extent vesting occurs after December 31, 2004 6
The Law • Penalty for non-compliance includes taxation at vesting, plus a 20% additional tax • For discounted options, spread is taxed (plus the additional 20% tax) at vesting and any incremental value is taxed annually thereafter until exercised 7
Page 1 and 2: Private Company Stock Options: Dete
Page 3 and 4: The Law • American Jobs Creation
Page 5: The Law • 409A penalizes: - Disco
Page 9 and 10: Valuation Methods • To qualify fo
Page 11 and 12: Valuation Methods • Factors to co
Page 13 and 14: Valuation “Quasi” Safe Harbor
Page 15 and 16: Valuation “Quasi” Safe Harbor
Page 17 and 18: Case Study • Emerging technology
Page 19 and 20: Scenario 1 • IPO likely in 2006 o
Page 21 and 22: Scenario 3 • Neither IPO nor sale
Page 23 and 24: Modifications and Extensions • Mo
Page 25 and 26: Modifications and Extensions • Ex
Page 27 and 28: Remedial Measures • Alternative 1
Page 29 and 30: Accounting Considerations • AICPA
Page 31 and 32: GOODWIN PROCTER LLP Boston Exchange

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