Ezel / IRS Rulings / 200944044

CCA 200944044: Stock-option exercise generally creates the wage event

Number
200944044
Outcome
Advice
Document type
Chief Counsel Advice
IRS subject
Wages Subject to Withholding
Topics
Employment taxes
Code sections
§ 3401
Ruling dated
January 21, 2009
Publicly released
October 30, 2009
Source
View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2009, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2009
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

This Chief Counsel Advice addresses when employment taxes apply to nonstatutory stock options. It states that the wage event generally occurs when the options are exercised, and that employment taxes apply to the spread. When the options are for stock in another company, IRC § 3401(d)(1) may determine who has the liability. The Advice also states that if the options are bought back, the wage event occurs at that time.

Ruling snapshot

  • Question: When does the wage event occur for nonstatutory stock options, and who may have the employment-tax liability?
  • Outcome: Advice given
  • Key authorities: IRC § 3401(d)(1)

Full text (IRS public release)

ID: CCA-121182-09 Number: 200944044
Release Date: 10/30/2009
Office: -----------------------------
UILC: 3401.01-00

From: ---------------
Sent: Wednesday, January 21, 2009 6:24 PM
To: ----------------------
Cc: ---------------------------------------------
Subject: RE: quick questions

Generally, the wage event occurs when the nonstatutory stock options are exercised and employment taxes apply to the spread. When the options are for stock in another company, (d)(1) may come into play as to who has the liability, but I also believe there is a RR on a related issue.

If options are bought back, wage event would occur at that time.

I'm copying --------on this response in case he wants to weigh in. He is primary contact here in ---- on application of ET to stock/equity remuneration.

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