How is US Tax Resident Taxed On Stock Options Vested Outside US?
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Employee, who is citizen of Argentina, received stock options that vested entirely while living in his home country. Now is in US working for the company (non-immigrant alien status-L1 visa), is US and California tax resident, and plans to exercise his stock options.
How will the US tax his stock option exercise and company handle withholding (i.e., is the full option spread taxable in the US, part, or none for Fed, State, FICA)? I'm familiar with general rules on taxation of globally mobile employees (see http://bit.ly/UGsYWk) but wondered about this situation of US tax resident where options all vested outside US.
Thank you for your insights,
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Bruce I believe that the last part of your question is key in this situation. Similar to how states vary in determining when an award is earned likely the US also has its interpretation. California usually determines taxable income from grant to vest and I would dare to say that the US would give credit to the award being granted and vested outside of the US by taxing part or perhaps none. The other factor may be the length of time as a US tax resident. This is definately an interesting situation and I would definately be interested in which factors are given more weight in the final determination.