Donating Unexercised Stock Options - Taxes

If an unexercised stock option is donated to a charity, what is the value of the option? Do you have to wait until it is exercised to determine the value for a tax deduction? Or do you just deduct the value of the option at the time of donating even though it can’t be exercised? Or do you just wait until it could be exercised? Can you even donate an unexercised option?

At the companies I’ve had stock options at (three), the options could not be traded, transferred, sold, given away, used to settle a debt, stuffed down someone’s throat, etc. without the express written approval of the Board of Directors. So no, I’m pretty certain you can’t donate stock options to a charity.

Karl - are you talking about options that you have purchased yourself (through your broker) or ones that you have received through your company as Muldoon asks?

I presume that it’s the second option because you are aware of the time value portion of an option’s price and unless you’ve got a LEAP (long-term option), it could lose a significant amount of value in the transition. Besides, the charity would then have to put up a certain amount of money to get the shares anyway, which would entail opening an account, etc.

I would instead suggest: 1) you exercise the options yourself and donate the stock or 2) exercise the options, sell the stock and donate the cash. You will in effect be donating a lot more money to the charity.

A lot more to the charity for the same cost to you that is.