What is Form 3921?
Form 3921, Exercise of an Incentive Stock Option Under Section 422(b), is a form provided to a taxpayer when they exercise an incentive stock option (ISO). The form is required to be furnished to a taxpayer by January 31 of the year following the year of the exercise of the ISO.
No income is recognized when an ISO is exercised. However, a return that includes AMT must include in AMT income the excess of the fair market value of the stock over the amount paid, and this adjustment becomes part of the AMT basis of the stock. However, if the stock is sold or otherwise disposed of in the same year as the ISO, no adjustment is required. See the Form 6251 instructions for more information.
The taxpayer needs to retain the form as it will be needed to calculate the gain or loss when the stock is sold or otherwise disposed of.
What information is reported on Form 3921?
Form 3921 includes the date the option was granted, the date it was exercised, the exercise price per share, the fair market value per share on the exercise date, and the number of shares transferred. Preparers can use this information to determine the tax treatment of the ISO exercise and any subsequent sale of the stock.
For detailed reporting requirements and box-by-box guidance, see the IRS Instructions for Forms 3921 and 3922. Preparers should also refer to the Form 6251 instructions when determining whether an ISO exercise creates an AMT adjustment.
Additional Information: