Valuation of Employee Stock Options

[venus82]

Hello all,

Does anyone know the proper method for valuing employee stock options?

After my 341 hearing, the standing trustee is challenging the valuation of employee stock options I hold. The options are fully vested. When exercising the options the stock agent subtracts the cost to buy the stock (option strike price) from the market price. Then an additional 40% is withheld from the net proceeds for taxes. I get a check for whats left.

When I valued the options for Schedule B I took the market price at the end of the day prior to the date of filing multiplied by the number of options. I then subtracted the cost by multiplying the strike price times the number of options. I then deducted the 40% tax withholding I would be subject to if I exercised the options and used the remaining dollars as the value.

The trustee is not allowing me to deduct the 40% tax withholding amount. So what is the correct method?

Help!

[2muchcredit]

Not sure if this was the correct way, but our lawyer did not take into account taxes. She took the value at market closing that day (we met her at 5pm that day) and subtracted the amount my husband could buy the stock options for. She exempted the entire amount. The trustee did not question the stock options at all at the 341 or the valuation. She made sure to note how she came up with the valuation and had all the supporting numbers if we were asked at the 341. We did not ask why she did not take into account taxes, as they routinely take out 50% when you exercise them.

[venus82]

Thanks for the reply. In my case the valuation is important as I don't have enough of the exemptions left to cover the value of the stock options.